11 Jun 2019

Equity - What is it?

Equity.                                                                                                                                                                                            "The money value of a property or of an interest in a property in excess of claims or liens against it"- Merriam-Webster Dictionary

 

Its a weird term you may of heard once or twice, and it has a few meanings. And one of the most common, is the use of it in the business world - in regards to investments.

Now hold on a minute, I'm looking to buy a house to live in. Not to rent out to someone else!

Yeah, you and the other 98% of people. But that doesn't mean you aren't building equity - that is, earning money investments wise.

Let me break it down for you.

Lets say you buy a home for $100,000. Then the neighborhood you live in, becomes super popular and everyone wants to live there. Its quiet, well-maintained and is just quirky to live in!

What happens? The price of the homes and land in that area rise. 

So that house you spend $100,000 on? Its now worth $120,000. You essentially earned $20,000, in equity. Wow!

Of course, thats a 20% increase in price. Which is fantastic from a investment viewpoint. 

 

So whats the point of a post like this on a Construction companies website? Well, despite being a writer I'm actually much better with pictures. Go figure. 

TO THE CHARTS!

Equity Growth Per SqFt 2015-2019

 Data Taken from Har.com 6/6/19

Above, we have a chart of the average price for a Sq Ft of a home in different communities. They key to this however, is how it shows change over time. 

Now this can seem REALLLY boring when you don't quite get the context, or what it means. But as you look closer at the graph you can see how it changes, more specifically which ones change. Let me clarify for you.

If you're familiar with the area we build around, you probably have at least heard of these communities. If not.. Is it nice weather underneath that rock? 

Anyway, Bentwater Community is known as a "Above average community". Its gated, well kept and honestly? Just a nice place to be in. Its very similar to April Sound, to give ya'll a picture for reference. 

Arrowhead Lakes, Frontier Lakes and Royal Forrest are generally similar with eachother in class. They're a lower-than-average income neighborhood. Which, for some people - is a put off. 

But this is almost comedic for us at ASGi. We started work for these communities (Frontier and Arrowhead) in late 2017. Annnddd the results speak for themselves. 

Frontier Lakes - Which was 1/5th the cost of Bentwater at the start of 2017, has now over took it. You can see both of our communities taking HUGE spikes in their cost, and equity. Royal Forrest has had a steady increase over the years, and Bentwater is, just staying a float. (Please laugh at that pun)

To put this in "Laymen's Terms" or TLDR;

A home in Frontier Lakes that cost you a $100,000, is now worth $180,000 today.

You just made 80k in equity. Look at you- you lil~Warren Buffet you-!

So what should you take away from this? Maths is hard. But more importantly, we turn communities around.

 So there it is, you found out what equity is, how you build it and what it does for you. So are you going to get building? Or continue reading a comedic blog post? 

genius