Building Equity
Equity is real estate is not always immediate. Good deals are out there in any market, and being in an equity-positive situation can be a reality if you purchase correctly. Equity generally builds over time and most real estate purchases have a long-game benefit.
Building wealth through real estate offers a huge opportunity for financial growth. However, like any other investment, you need to be smart about it, understand the pros and cons, and work with knowledgeable professionals to help advise you.
Invest in property to increase finances over time
In 2021, 2022, and much of 2023 real estate markets throughout the US saw positive gains month-over-month. This statement means that homeowners were building equity faster than ever before. With monthly mortgage payments that are ticking away at your principal balance, along with rising values, your nest egg can add up over time.
Buyers often pay a premium in an active market where homes sell with multiple offers. Buyers in hot markets often overpay for a home, and during the boom of the last couple of years, appraisals were often lower than the purchase price but with really low interest rates, it still made sense to many to purchase at the elevated price and properties were still appreciating at a consistent rate of 10- 15% per year. Many neighborhoods were seeing even higher returns.
So what about when the market is not as active and values are not increasing as fast? Still makes sense to buy in my opinion. There is opportunity in every market and if you purchase with the long game in mind, a home’s equity can benefit you in years to come. Buying in a down market or in a slower market means two things.
One, you likely do not need to buy at a premium price, allowing you to capitalize on the increase in values quicker.
Two, the equity you can build over a year of homeownership is far better than what you will yield in a traditional savings account especially when you factor in the monthly mortgage payments that do pick away at your principal vs. rent payments that never financially work for you.
Maintain your home and protect your investment
I can't stress this enough. Investing in your home can also build value, but maintaining it protects the asset.
Borrowing against the equity in your home
Equity can also provide borrowing security. While I believe in the importance of paying off your mortgage as quickly as possible, there is security in having equity in your home.
I'll leave you with this. The bottom line is buying, getting on the property ladder, owning something, and letting it grow your wealth is a good thing!
Interested in learning more about market conditions and where there is opportunity at the moment? You can also follow us on Instagram @sellingportlandrealestate or contact us directly if you're ready to buy or sell your home in Portland, Oregon, or SW Washington at 541.728.1143.
