High Net Worth Real Estate

Understanding high net worth real estate is a very concept, first you must understand the concept of net worth. Net worth invariably means the difference between the value of your net assets and the value of your net liabilities. Your assets include land, machinery and current assets (cash in hand, stocks and other paper assets) and your liabilities are the debts that you owe. Once you have calculated

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both then you find the net difference. If it’s positive then that’s your net worth and if it’s negative then it’s your net position at a loss. High net worth real estate can be calculated based on the estimated value of the real estate versus any mortgages and encumbrances that are levied on the property. This means that if you purchase real estate using a mortgage and that is the only asset that you have then the equity that you hold in the property is your net worth. This is at times is a very good thing because of the appreciation of real estate in certain countries is on the rise. However if the property value depreciates in value then this is a major dilemma. Hence to calculate your net worth in real estate the formula is as follows:

Estimated Market Value (emv) – (Mortgages (mv) + Encumbrances (en)) = Real Estate Net Worth (Equity)

However on to the concept of high net worth real estate is one where the emv continues to appreciate over time increasing your equity in the property and at the same time increasing your net worth. This is calculated quite easily, the rate of appreciation should be higher than the rate of the mortgage loan that you have. This means that if the emv increases by 10% per annum and the mortgage loan is at 7% per annum, this is a high net worth real estate mortgage. These can be found all across the world. You can actually use the calculators to work out net worth.
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However over the last six (6) months the losses in the sub prime mortgage market has severely crippled the emv of properties. This has in fact lowered the values and in fact has effectively wiped out any equity or net worth of many real estate investors and owners. This has brought to the fore even more the concept of high net worth real estate. Real estate investors can search for these scenarios or in fact make them for themselves. We examine these methods,

  • Purchase foreclosed properties for sale below market value
  • Purchase properties in real estate auctions at below par prices
  • Acquire decrepit properties and ‘flip’ this real estate and sell it at a higher rate. (Flip real estate)
  • Purchase property before it is constructed and holds after. Purchasing properties before construction has a great value.
  • Add value through construction to existing real estate.

These are the best ways to acquire high net worth real estate in the US. A very good concept that has the potential to provide an increasing net worth.

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