What Is Equity In A Home

What Is Equity In A Home

Kris Krohn here with Limiltess TV and guess
what? Today we’re gonna be answering that question
that so many of you are asking, what is equity? And oh my goodness this is so important for
you to understand, you know why? When I bought my very first house it had $40,000
of equity. Guess what that means? That meant that I found a treasure chest filled
with $40,000 of booty in it and that’s equity. We’re gonna teach you what it is, how to leverage
it, how to use it, how to grow it to get you on that way and path to financial freedom. What is equity? Alright, gonna draw you a picture here that
I think you’re gonna like. This, guess what it is? It’s a house! Let me tell you something about this house. This house has a value of $100,000. But I moved into it 15 years ago and I’ve
been paying my mortgage and the principals are getting paid down and how after 15 years,
I owe $75,000 on the house. So, it has a value today of $100,000. I owe $75,000 and if this is my meter, I have
0, 25%, 50%, 75%, 100%. Take a look at this. Right now, I have a gap of what I owe is $75,000
and what it’s worth is $100,000. There’s a gap right there of $25,000, it also
has to be 25%. I’ve got a 25% equity position on this house. Now, let’s say that I live in the house longer and I receive a little inheritance. I decide that I pay my house down to $30,000. How much equity do I have? Well I owe $30,00. It’s worth $100,000 so guess what? There’s a equity position here of $70,000. Equity is the difference between what you
owe and what it’s worth. and that’s also what you use to calculate
your net worth. So for example, if all I own is this asset
and nothing else and someone said, well what are you worth? Well I don’t know, my job I make $40,000 a
year. Cool! but what are you worth? Well I’m worth $70,000 How’d you arrive at that? Well, my house is worth $100,000 I owe $30,000
on it, I have $70,000 of equity. And that also translates in my net worth. So here’s what this applies in real estate
investing that I absolutely love. Let’s say that we were treasure hunting in
the market. Because this is the way I use that term equity
in all my videos. And let’s say that I found a home that I was
able to purchase for $200,000 and let’s say that it had a value of $300,000. If I can buy it for $200,000 and it’s worth
$300,000 how much equity is there? $100,000 Ok? And, because the moment I buy it for $200,000
I’m worth that much more money. If I were to sell it in the market for $300,000,
you know other than some cost, some seller cost, there’s roughly how much money that
I would get? $100,000. So equity is not always usable until you do
something like sell the asset or I can go to my bank and say, I don’t wanna sell the
house but I wanna refinance it with a home equity line of credit. And the bank says, well we’ll give you a home
equity line up to $240,000. So check it out. I owe $200,000. It’s worth $300,000, they’ll give me a checkbook
or credit card linked to this that will allow me to go up to $240,000. So the difference between what I purchased
it for which is what I owe and this line of credit of $240,000 there’s a gap there of
$40,000. That’s $40,000 that I could use as a down
payment on another house. I could use it to buy something different. I could use it to invest with. And when I use it, I will add my payment and
I will decrease my equity. So equity is that amount that you have. And where I really utilize this is in treasure
hunting because, you know what I don’t really like to buy a house for $100,000 that’s worth
$100,000. You know why? because I didn’t walk in to
any magic money when I do that transaction. That’s how novices transact. They might be doing that because they see
the cashflow. I look for 2 primal primary basics when I
look at any deal, Number one, what is it’s equity? Number two, what is it’s cash flow? Let me give you a realistic scenario to kinda
finish up this video with to give you an idea. I just finished looking at a house that has
a value of $150,000. It’s a home that I can purchase for $120,000. How much equity is there? $30,000 You’re catching up fast. Ok good job. $30,000 is how much equity I have and this
is what percentage of $150,000 value? 20% My equity isn’t just a, cannot just be reflected
in a financial amount but also it expresses a percentage. And this is what’s really important to me
when I’m walking into a deal. Because this house and this scenario has $30,000
of equity or a 20% equity position. So when I look at a deal I wanna know how
much equity and what is it’s equity position and these are those numbers and now you are
a master at equity. Some might say, go build some equity. I’m gonna invite you to go find it cause it’s
out there and it’s available. Thank you so much for joining us today on
Limitless TV. And tomorrow, we’re gonna be talking about
how to love yourself when you don’t know how. This is something that people are out there
searching for. They want to get this answer to how do you
step really into that feeling of self love. Come in tomorrow.

100 thoughts on “What Is Equity In A Home

  1. When i’m rich i’ll come back in 10 years

  2. Many thanks for this simple break down Kris….

  3. Is there any danger when taking out an equity line of credit? Pros and cons

  4. Love it! Thank You

  5. Great video^^

  6. In your second example (and your third) you explain that what you owe is your equity. Because in the second example you bought the house for 200k and it was worth 300k so you owe 100k and that's your equity. But in the first example you say that you have 70k of equity because that is what you get after you subtract what you (30k) owe from the 100k house. Is your equity what you don't owe (what you've paid off) or what you do owe? Or am I missing something?

  7. just from this one video i understand completely how you did it… i have been telling my wife this for the last year or so about doing it… she feels there is a risk and she doesnt want to but really im going to show her just like i showed her with the business we own

  8. fairly simple

  9. every time his marker squeaks i giggle

  10. Super straightforward and to the point, love it, thanks!

  11. Great video, i will invite you to visit my island, when I am able to achieve financial freedom

  12. Thank you, you made it clear!

  13. i need to re pipe should i use equity yah or nay?

  14. The stuff i wish they would of taught me in school 🤦🏾‍♂️

  15. How to buy hse if not working.tell me how

  16. I’m only 14 and somehow understood this quite well but from your other videos a question has risen to me, would I be able to rent out a house that I’ve only payed a down payment to? Would that be legal etc.

  17. How is value determined? I get that you can purchase a house for cheap but who gets to say that house is worth 300,000?

  18. How do I know the actual value of the property when I walk into the deal?

  19. Awesome video! Thank you soooo much for making it.

  20. I feel like this man is under rated.

  21. How do u figure the value of the house vs. The price u purchase at?

  22. thanks for sharing the ideas. love watching your channel

  23. is it sad i still dont understand? smh

  24. 👍🏽🙏🏽

  25. i dont get it……

  26. I am confuse of the 40k???

  27. Yeah but how do you purchase a home worth a higher value for less $

  28. I want to know where you are finding these homes worth 200k or less!

  29. Ok so if I buy a house for 200k when it's 250k the bank can give me 50k. The part I'm not understanding is if I have to pay the bank back for that 50k they gave me.

  30. How do I get involved with your team?

  31. how do you determine or know the value of the house?

  32. What if you don't exactly want to do real estate..? Is there any other way through other jobs?

  33. You are saving so many lives telling people this! Hopefully on day I can learn more about real estate, and actually get into it. Thank you so much for showing people this, you are a life saver!

  34. If you buy a house and you don’t know what equity is. don’t buy a house.

  35. But how do you buy a home for 200k thats valued at 300k is what I'm trying to figure out?? Auctions or??

  36. How exactly do you make the initial equity because if you bought a house for 120k why would someone else pay 150k for the same house

  37. And I have question how do you know the equity of an house and then compare it with the price or the purchase to see if it is an profitable deal or not please answer

  38. where does the home value amount come from, from a banks point of view? You keep saying value but who is assessing that amount? The city?

  39. This is the worst financial video I've ever seen, Jim Christchurch New Zealand

  40. 🍒🍑🍒🍑

  41. Can you make a video on buying foreclosure properties please

  42. What happens after you buy these houses? Do you rent each one out at the price of the mortgage/higher?

  43. Awesome. Thank you👍🏼

  44. Bro thank you. This helped tremendously

  45. 2:05

  46. How to you know how much the value of a house is? And if you know it, how can you buy a house for less?
    And thanks a lot for the videos! I love them💪🏻❤️

  47. But to achieve 40k dollars of equity credit do you have to have a 100k gap of the homes worth?

  48. Where do you find the value of the house? Is there a website??

  49. You are amazing at explaining everything! Thank you!

  50. So for example im in the middle of buying a condo for 109,000 that’s worth 120,000… so after 3 years I can get equity to go buy me a car ? Or go buy me a business

  51. What a great video! Thanks for sharing the knowledge 👏🏼👏🏼👏🏼

  52. How to you know about a true value of a house?

  53. Wouldn't it be extremely difficult to find a house that has that big of a value and low purchase price? And if you did find one I'm pretty sure you would have to repair it and with the amount that you're spending to repair it, you could end up breaking even.

  54. How do calculate your new payment using your home equity line of credit?

  55. So do you actually need equity’s

  56. How did you calculate 240K for the HELOC?

  57. How do you start when your completely broke with no credit?

  58. Equity = Booty. I see Do you have a step by step book 🍽

  59. Yes I will

  60. What to do when house prices fell like rock

  61. This
    Guess what it is, it's a house😂😂😂

  62. quick question. how did you get the 20%?? i understood everything else clearly but i tried multiplying, dividing etc and still couldnt find a way.. BUT!! the way i did find 30k was when i Multiplied 150,000 x .20 = $30,000.. but how do you find the percentage? because its not always going to be an easy solid number like this.. so curious to know the formula.. so ican as well find these 2 sweet spots!!

  63. If you can't explain it simply, you don't understand it well enough.

  64. Looks like a Tekhen to me

  65. I am about to build a house on my lot. What are the features I need to build into it to maximize it's value? For example,
    say I have 600 sq ft for bedrooms. Do I make 2 (300 sqft), 3 (200 sqft) or 4 (150 sqft)? Is it worth it to make the house
    bigger to achieve 4 bedrooms at 200 sq ft? Bathrooms, laundry room, porch, deck, living room, kitchen, dining room?
    Floor plan? Fenced yard? Slave Quarters? Wait what year is this? LoL

  66. I love this guy…he is like the blues clues of real estate education

  67. What interests do banks charge on an equity line of credit

  68. how do you know how much value the property actually has when you buy it

  69. this guy should be teaching our kids i say that in the most positive way when i was in high school it was hard to stay enthusiastic when the facilitators didnt

  70. Krohn you really awesome,educating and life changing, from Zambia… Please do a video on how to invest in public properties thank you…

  71. Thanks for the great content brother

  72. Okay so equity sounds like a scary word or concept, but from my understanding (correct me if I’m wrong), in the most simple of terms, it’s how much the property is yours.. if it’s value is 100k and I’ve payed 25k meaning I owe 75k.. so far the property is 25% mine basically. I’m 25% into owing it 100%. If I explained that right

  73. Deficit spending 101

  74. How did you get the 20%

  75. Why would someone sell u house of value 150k for 120k?

  76. im 16 and I'm going to be richer than lil pump

  77. FinBrain's Deep Learning models beat any other analysis/prediction method for Stocks, ETFs, Crypto and Foreign Currencies, you can visit our website for more.

  78. Thank you for the video. I am closing on my first property at 20 years old. Once i get approval to subdivide the lot, there is approximately 100k equity in it. Since its tevhnically my "primary residence", all capital gains will be tax free. Crazy

  79. Awesome video. Thank you very much.

  80. 40thousand dollars worth of booty

  81. Can you pay off the equity loans you have right now

  82. Thanks!

  83. Who sets the value? The bank? Or the county per say? And why would someone sell a house with a value of of 150k for 120k

  84. How do you measure the properties value and it’s equity?

  85. no mention of risk?

  86. 5:03 That was funny. Educational and attention capturing video

  87. Wow this was very informative thx you sir for sharing

  88. nice

  89. What's the difference between Debt and Equity?

  90. Thank you

  91. I bought a house for 75k 12 years ago now it’s worth 115k

  92. Thanks

  93. I'm thirteen and I'm taking notes on this already, haha.

  94. Wow I just learn something new today, Thanks boss for really breaking down the formula

  95. Awsome explanation, one question, were u find the value of the house, who determine that value, probably comparing the average value of the houses close by?

  96. With the home equity line of credit of 40k added to the 200k do you have to pay that back though since it’s part of the borrowed 240k?

  97. great stuff man

  98. How is it possibly know the value of a house? Why would a seller sell a house to someone for less than it's valued at?

  99. How to know the house value ??

  100. Yep i got it

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