Real Estate Investor · Philadephia, PA · Member since 2016 · 214 posts · 36 votes
Totally newbie in the REI and start to understand the different strategies.
Cash flow is very straightforward but equity is not in the same way.As far as I believe,other than using the equity to get another loan for another invest or pull the cash flow out from the equity,equity is just the concept defined,not so much useful in build the wealth.
Any one can insight me on this concept for build/create equity as in the way for building wealth?
@Vincent Chen Building equity can definitely build your wealth, if you use other people's money (having a good rental property), or increase the property value in some way that doesn't cost as much as the value you added (for example, a rehab or remodel), or if you happen to buy a property that appreciates so that it is worth more than you pay for it. All of these are dependent on you selling the property for some higher value than what you paid for it. Your equity can go up and down depending on market forces, but it definitely a way to build wealth.
Does this help at all? I am fairly new to real estate as well. Good luck to you!
@Vincent Chen, you're right about equity being less straight forward than Cash-on-Cash return on investment. And @Jennifer King is right about how ongoing equity increases will (also) help build your wealth. When you want to buy investment properties using borrowed money, it's your LENDER who decides how much equity already have, that you can borrow against.
ie. the more equity you have, the more you can borrow!
But unless you DO use your equity for further wise borrowings - it's arguably WASTED equity!
As @Joe Villeneuve puts it: unused equity is where your money goes to die! All the best...