Property Value for Homes

5 Replies

I'm currently reading the Low and No Money Down book by Brandon and can't seem to grasp this concept, comment please if you now the answer. So, If a house is worth $100,000 and the investor puts a 30% down payment on the home why would they have no real equity. Wouldn't the investor have $30,000 equity or does no real equity mean you can only get 90% of that $30,000 to leverage at most and that wouldn't be much equity. HELP!

Yes, you’d have $30K in equity with $30K down payment.

Originally posted by @Jeff Long :

I'm currently reading the Low and No Money Down book by Brandon and can't seem to grasp this concept, comment please if you now the answer. So, If a house is worth $100,000 and the investor puts a 30% down payment on the home why would they have no real equity. Wouldn't the investor have $30,000 equity or does no real equity mean you can only get 90% of that $30,000 to leverage at most and that wouldn't be much equity. HELP!

I use the term "borrowable equity". eg. In your example, if a Lender will lend 70% Loan-To-Value, and you've already borrowed 70%, then you have no "borrowable equity" (but yes, $30k equity).

[Once you get beyond 70-75% LTV, I don't recommend squeezing that game any further].

In principle, the idea is to buy extra equity than you're paying for. 

eg. In your example, you want the $100k property to be already valued at $130k+! All the best...

Brent, I see what you mean by already borrowing 70% but you already put 30% down so you would have some borrowable equity because you already paid 30% up front. After you put that 30% up front wouldn't you just be paying your mortgage after that, the $70,000 monthly at whatever interest rate you received? So you wouldn't actually be borrowing 70%, you would paying that 70% for a fixed term monthly.

@Jeff Long , if the Lender lets an Investor borrow (only) 70% LTV (which is why they must put down $30k in your example), then where is their remaining "borrowable equity"?

Brandon's "BRRRR method" places importance of getting that $30k back upon refinancing.

That's why you need to have been buying / value-adding at a (significant) discount! Cheers...

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