Investor · Boston, MA · Member since 2022 · 5 posts · 2 votes
Can anyone point me to any resources on equity and how to calculate it/how much you'll potentially have in X amount of time? I'm looking at a house in CT that doesn't look like a good play in terms of rent income but I'm wondering if there might be a good equity play lurking somewhere in there.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
4y
Sounds like you're really referring to appreciation? There are generally two ways real estate investors think about appreciation, market appreciation and forced appreciation. Market appreciation is pretty much entirely out of your control, and is driven by (as the name implies) broader market forces. Forced appreciation refers to your business plan and how it can impact the value of the property.
Rental Property Investor · RVA · Member since 2016 · 5k+ posts · 4k+ votes
4y
Sounds like you're really referring to appreciation? There are generally two ways real estate investors think about appreciation, market appreciation and forced appreciation. Market appreciation is pretty much entirely out of your control, and is driven by (as the name implies) broader market forces. Forced appreciation refers to your business plan and how it can impact the value of the property.
Plymouth, MI · Member since 2013 · 13k+ posts · 19k+ votes
4y
Sure, it's very easy. Do an internet search for local fortune tellers. The main requirement is that they have a crystal ball. It would help if they knew a little about REI, but since they are predicting the future, that's not really necessary.
In other words, it can't be done. Equity generated from appreciation can not be predicted.
"Forced appreciation" is nothing more than fixing up a property so its value increases more than it cost you to fix it up.... Basically a fix 'n flip or brrr type approach. That all just means getting the property low enough to make the numbers work.
Otherwise, there is no great way to determine how well any property will appreciate. This is why I think there is a movement to go with cash flow with appreciation as the "icing on the cake" instead of the age old investing for appreciation. For centuries, land / real estate investment was always considered speculation. It still is. Good luck.
Can anyone point me to any resources on equity and how to calculate it/how much you'll potentially have in X amount of time? I'm looking at a house in CT that doesn't look like a good play in terms of rent income but I'm wondering if there might be a good equity play lurking somewhere in there.
1. Investing anywhere will be profitable as you actually still make money because of the inflation. 2. You could gues-estimate the future price by examining cap rate trends or house value trends in the past such as Zillow range. You could also even find out which block in a particular zip code has the highest growth.
Investor · Las Vegas, NV · Member since 2020 · 153 posts · 136 votes
4y
Hey Alex, great question. Equity is pretty black and white - how much you owe on the property vs how much it's worth.
If you want to factor appreciation into your analysis, it would be wise to go back 20-30 years and look at the appreciation %. With the market we're heading into now, appreciation in most areas will be heading downward, so don't expect quick value increases like we saw from 2018-early 2022.
There're two three factors that are impacting appreciation.
1. Mortgage rate/10 years Fed note 2. Employment/Buying power of the particular city. 3. Supply/demands of particular city.
In our area, the smoothed moving average of appreciation has a 6.8% minimum appreciation every year. The closest city that mimic US national average is one zip code in Kansas City. All these numbers are 80% predictable.
As we speak now to ratio between GDP to mortgage payment US nationwide is 1:30 ; in Asia it's between 1:70 or even 1:150. The appreciation is far from over. Thing is, starting from next year, there would be more supply in many markets, especially multifamily so one shall expect a reduced rent growth (and then appreciation). I guess most conservative MF GP is now is projecting only single digit IRR.