Buying a Property with built in Equity?
Hi, I hope you’re doing well!
What are some ways to purchase a property with built in equity, paying less than its worth.
For example, let’s say you get a loan for $200,000. When the property get appraised, from my understanding a lender do not want to lend more than the property is worth. If you want to have 10% built in equity in the property right when you purchase it, how do you go about it and what is the math?
Is this the proper formula ( Purchase Price/ Appraised Value) to calculate it?
#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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#3 BRRRR - Buy, Rehab, Rent, Refinance, Repeat Contributor
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Negotiation skills.
Hey Elie,
Purchase price does not determine the "worth" of a property. it only determines what you are agreeing to pay. So if you want to have built in equity from the start, you need to have a solid idea of what that property is worth, and then negotiate under that value for a purchase price.
For example - If a property is worth around 200K (based on comps in the area), then you need to buy it for 180K and hope that it appraises for 200K. It won't always be perfect, but the goal is to not overpay for a property.
#4 Multi-Family and Apartment Investing Contributor
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#4 Multi-Family and Apartment Investing Contributor
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- Shelton, WA
Equity matters to the seller..........nothing to do with the buyer. Property is worth what someone is willing to pay.
Quote from @Jon Puente:`Thank you for your response Jon. I really appreciate it.
Hey Elie,
Purchase price does not determine the "worth" of a property. it only determines what you are agreeing to pay. So if you want to have built in equity from the start, you need to have a solid idea of what that property is worth, and then negotiate under that value for a purchase price.
For example - If a property is worth around 200K (based on comps in the area), then you need to buy it for 180K and hope that it appraises for 200K. It won't always be perfect, but the goal is to not overpay for a property.
@Elie Merisier it’s probably easier to buy something and create value (equity) by rehabbing the property or creating an extra bedroom in the existing space, etc