TOTAL INITIAL EQUITY

[JayCinta Henry]

In the Rental property calculation report how is the TOTAL INITIAL EQUITY arrived at? 

Quick snap shot is 

cost 110,000

down payment & closing 12000

rehab 30,000

ARV 170
Rental 1450/month
TOTAL INITIAL EQUITY in the report is 65,500. How is this figure arrived at?

[Nathan Roberts]

Hi @JayCinta Henry,

Equity is simply the amount of cash in the deal and/or ownership in a property. If the property in your scenario is purchased for $110,000 and you put down $27,500 (75% LTV mortgage) then you have 25% equity in the property. You left off some variable in this post. I would need to know the following to calculate your equity:

• How much is the property currentlyly worth prior to rehab?
• What did you purchase the property for? You said $110,000
• How much was your down payment not including closing cost?
• What is the loan-to-value of the mortgage you recieved?

Your question was "TOTAL INITIAL EQUITY in the report is 65,500. How is this figure arrived at?". Initial equity would be based on the purchase price, not the ARV or when you do a rehab; what is your total equity after the rehab would be a different question. Simply put, the amount of ownership in the property would be your equity. For example, you can buy a property worth $100k for $75k with a 75% LTV mortgage. If the mortgage is based on the $75k purchase price then you will have $43,750 in equity. You automatically have $25k of built in equity when you purchased, then you put down 25% for the property which is $18,750 (25% of $75k). Let me know if this helps. If you need me to make this example more clear, I can do that as well. Talk with you soon!

Best Regards,

Nathan Roberts