Equity Question. Really need help.
2 Replies
Brianna Ross-Lord
posted about 1 year ago
Which is better for the investor whos buying the home? High or low equity? And why?
Aaron K.
Specialist from Riverside, CA
replied about 1 year ago
If you are talking about what the seller has both can be beneficial, but generally high equity is better because the seller will likely walk away with money.
Brent Paul
Rental Property Investor from Shakopee, MN
replied about 1 year ago
I think that will depend on what they are going to do with the home. Buying something with lots of equity more than likely means the house needs some repairs or updating. That doesn't mean it's a bad deal. For a flip that would be good. With lots of equity you could refinance and pull some money out or get a HELOC. You could then use that money for a downpayment on the next one.
Something with low equity is fine too if you are going to just rent it out and it cash flows. Property values go up and down. I buy for cash flow not for property appreciation. It's always a gamble on what the market is going to do. I get my down payment back over time and my renter pays down the mortgage so it really doesn't matter much to me if the house value goes down or up. So long as my property stays rented. In a perfect world the value would continue to climb, but there is no guarantees of that happening.