Saturday, March 28, 2020

What is Equity in Real Estate?

Equity is a term that is used in many facets of business such as Accounting, Shareholders positions, and Real Estate. We're going to focus on Equity as it pertains to Real Estate. First, let's unravel where Equity derives from. History shows that Equity as we know it derives back to Old French word Equite. It originally meant the quality of being equal or fair, used mainly in the context when dealing with others, according to (etmology online)."

In a way, this is similar to the description of Equity as pertains to homeownership. The market value of the home minus how much is owed to the financial institution for the purchase of the home. About 14% of homes in Sacramento, California are purchased with CASH. And CASH is King. The more cash you can bring to make an offer on a home can heighten the chance you’ll  acquire the asset. Similar to how a business can go up and down in value so can the Real Estate market (Less volatile than the stock market). Many factors can influence the Real Estate market (I'll cover this in a different post) but generally, in a healthy market, you can count on your home increasing an average of 3% annually. 


Why people buy homes? Bundle of rights, people have the Freedom to occupy and adjust their domain in ways that they want, they have the right to transfer title, sell or gift it the property. They can leverage the properties value to get a loan.


Equity through homeownership is where one can win big. When the market value of the Real estate in the area increases; ones that are similar to the homeowner's home so can one's Equity. Equity is in many ways can be used as a investment account. You have access to capital from Equity which gives the homeowner options. Maybe they want to send their kids to college or become an investor by pulling money out of their Equity. All of these option and many more are afforded to those with Equity.

                 https://youtu.be/Ui9fKMI0ki0               

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