Updated over 5 years ago on . Most recent reply
Can someone please explain me about this blog I've mentioned?
I was reading an interesting blog
https://www.biggerpockets.com/...
written by Brandon Turner but I did not understand couple of things from this blog which was =
1. How is our loan for $63,500 after paying 20% of $80,000 in Year One. Shouldn't it be $64,000.
2. In year one how is our equity $46,500 in year one?
3. How is our total net worth $56,500 in year one?
and can a property really be appreciated by 10% in one year by doing some minor repairs and improvements in it?
Can some one please explain?
Most Popular Reply
1. I'm not sure either why $63,500 was used instead of 64k because 20% of 80,000 is in fact 64,000.
2. He mentioned that actual value of the home was 100k and that it grew in value by 10% due to a combination of forced appreciation (renovation work) and natural market appreciation. So this means after 1 year the value of the property was 110k. Using those numbers, if the property value of 110,000 and you have a 63,500 loan then you have $46,500 in equity.
3. He adds in the $10,000 of positive cash flow collected during the first year to the total equity of the property to calculate total net worth.
4. Absolutely. Last year I purchased a property for $107,500 and did 10k of rehab on it. It appraised less than a year later for 152k which is about a 28% increase in value so it can absolutely be done.