Respuesta :
The increase a property's value beyond what the investor originally invested as a down payment is called Equity build up.
What is mean by Equity build up?
- Equity accumulation is the rise in the property's value as a result of the owner's regular main and interest-only mortgage payments.
- By dividing the mortgage principal paid in year one by the initial cash put in the property in year one, equity build up rate is determined.
- This needs to be calculated since, despite being an essential component of a mortgage payment, principle is not regarded as a cost.
- The equity buildup rate is determined for the real estate investor using the equity buildup for a property during the first year of ownership.
- The total return on a property in the first year is calculated by combining the equity buildup rate and the cash on cash return.
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