Forced Equity
In the context of real estate, equity is the difference between the current market value of the property and the amount the owner still owes on the mortgage. With investment property, building equity in a timely manner is extremely important because it permits a faster return on investment, and increases the amount that the owner would receive after selling a property and paying off the mortgage (if they chose to sell).
Forced equity is equity that is instantly put into the home by making improvements to the rental property. By improving the home, you not only increase the home’s market value, but also increase the market rent which permits you to make more money each month and pay off your property faster.
