To profit from real estate investing and stay on top of your competition, it is imperative to stay up-to-date with industry trends and developments. Keep track of significant real estate costs. Most beginners tend to overlook them, focusing on making the most of the current boom in property investment. Don’t make the same mistake.
Real estate associations and experts have weighed in on the situation, identifying the factors critical to today’s property investment scene. Read on and discover what you can expect when entering this field.
A Look Back on the 2018 Home Equity Situation
2018 was a watershed year for property investing. In the initial half of the year alone, homeowners cumulatively earned around $1 trillion in home equity.
Home equity is defined as the homeowner’s interest in a home or the portion of the property that you truly “possess.” For instance, you are considered the owner of your home. However, if you got a loan to obtain it, your lender will have an interest in your residence until you can pay them off. Home equity can go up over time if there’s an increase in the property’s value or a decrease in the property’s mortgage loan balance.
In 2018, home equity was positive on over 95% of mortgaged homes. Only fewer than 5% of homeowners have reported being underwater on their investment property mortgages. This positive development has led financial analysts to predict the following:
- Increased spending
- Growth of the economy
- Larger expenses on home improvement
It has been estimated that homeowners, on the average, got $16,200 in equity yearly. However, it is worth noting that most of the equity gains happened on the west coast, which means that they are not truly representative of the “average homeowner’s” gains. States such as California have been getting an average homeowner equity gains of $50,000.
The Hidden Costs of Home Ownership
While the housing market is very optimistic, there are also “hidden” costs that come with property investment. Here’s a breakdown of these expenses from a reliable real estate investors association:
- On average, a buyer will spend 41% of their monthly income on total monthly housing costs, with the utilities factored in. Do keep in mind that mortgages do not factor in costs from utility services.
- Homeowners spend approximately $9,080 annually on home-related costs apart from their monthly mortgage. This also involves an extra $757 monthly on home-related expenses, and only $3,000 worth of non-mortgage expenses are avoidable.
- Investors are expected to pay 5% of the purchase price for additional home closing costs. If you only stay in a house for a year or two, the closing costs may not be recouped, even if the home appreciates in value.
- Ending on December 31, 2017, homeowners have seen their property’s price rise by an average of 7% over five years. The 5-year period is crucial since appreciation doesn’t have an annual guarantee; it develops in the long run.
Get Support from a Trusted Real Estate Investment Association
If you’re looking to profit from real estate investing, it’s imperative that you know about the underlying costs of the venture. Maximize every investment with the guidance and support of an established real estate investment association.
As Indiana’s top real estate investment association, CIREIA helps investors realize their full potential in the industry through classes and events on networking and investor education. Being a member of CIREIA also entitles you to numerous benefits, including discounted rates at investor workshops and credit hours to Professional Housing Provider (PHP) certification.
Contact us now at (317) 670-8491 to begin your journey to wealth through investing