Equity building is a style of real estate rehabbing for income property. It requires far more funding and involvement than a normal rehab and frequently the investor holds the property instead of selling. The advantage is holding income property with a ROI that could not be otherwise obtained.
20 unit apartment building, vacant, abandoned, needing significant work.
Asking Price: $200,000
Rehab Needed: $500,000
Total Investment: $700,000
Rental Income Per Unit: $1,200
Total Gross Yearly Income: $288,000
Total Yearly Expenses: $130,000
Total Net Yearly Income: $158,000
Under no circumstances can an investor find income property with a 22% return on investment, but by doing a rehab of income property, the investor has been able to create his or her own equity. After a year of income flowing through the building, the investor can obtain conventional financing and pull money back out of the property to be used on a new project. In our example, the property netting $158,000 a year would have an income appraised value of $1,580,000.
Due to the amount of cash flowing through the rehab, this area of investment has a tendency to attract fraudulent activity. Investors need to have trusted advisors to guide them through the process and provide over sight at every step. Individuals interested in this area of investment should contact our office.