Real Estate Investment Tips and Strategies: Equity Does Not Equal Profit

February 2, 2008 | By | Reply More

Real Estate Investment Tips and Strategies : Equity Does Not Equal ProfitLet’s say you buy a property for $130K that will be worth $200K after you fix it up. It takes you 3 months to renovate the property and you have spent $20K in repairs and holding costs. This is a similar scenario that you have probably seen in one of the real estate investing TV shows on now. At this point, the investor and their team would celebrate their $50K dollar “profit” ($200K – $130K – $20K = $50K)

I would like to say that this is a gross misrepresentation of what you would actually net if you were to sell the property. It costs a lot of money to sell a property when you include the actual costs like Realtor fees, additional holding costs, buyer’s average discount, repairs to be done in reference to the buyer’s inspection, taxes, and other things that always come up.

Don’t be fooled by what you see on TV. Make sure you understand the difference between equity and profit when analyzing your deals.

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Category: Real Estate Investment Financing Strategies

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