How much equity in a home do most go after, whats the range?

Question

I've read that the equity in a home is where everyone's profit comes from because it's basically money the seller put in the house out of pocket vs. a banks money (mortgage). So what's a good % of equity do most try to find and what's the least that won't be considered? I also read somewhere that if the mortgage is more than the value of the home then the house is overpriced and there's barely any to no equity in it (none of the sellers money), is that correct?

Octavia

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Darrell Shepherd · Answer

You're confusing a few things.

Equity is the difference between what is owed on the house and what it is worth.  That can come from down payment, loan paydown, or appreciation.  Price and equity are two very different things.

If the sellers owe more on the house than it is worth then they cant sell it to you at a discount, so there isn't much to work with.  This is called negative equity.

Most investors work on % instead of an amount.  As a rehabber, I buy at 65-70% of ARV (after repaired value) less repairs.  So if a house is worth $100k and needs $20k in work, my offer is $50k or less.

People who buy and hold will typically buy at less of a discount, but typically dont want major repairs.

Are you looking to wholesale?  Buy and hold?  Flip?  Different strategies for each.