Long Beach Real Estate-Downtown Long Beach Condos

Long Beach Home Equity

Good or A Bad Investment?

I started my career as a Financial Advisor on Wall Street.  At the young age of 25, I managed over $20 million in client assets.  That was back when $20 million was really worth something, too.  We used a litmus test for investment analysis that I'd like to share with you, the Long Beach home owner.

Liquidity, Safety, Return (and to a lesser extent,) Tax Status.  The LSR-T litmus test helped us match specific investment choices and determine suitability for the client.  In plain talk, that meant  "Is this the right thing for the client ?"

Let's run the equity in your Long Beach home through the LSR-T litmus test, first.  I'll discuss some ideas to improve that "investment" in home equity.

I think you'll find, after my analysis, that Long Beach home equity is a really...

a poor investment but Long Beach real estate is a great investment.

LIQUIDITY:  How fast can you "use" the equity in your Long Beach house?  The answer is about 30 days; IF you have good income and credit.

LIQUIDITY SOLUTION:  A no-cost home equity line of credit- you pay when you use it and it's there for emergencies.

SAFETY:  Is your Long Beach home equity safe?  Is it immune to market fluctuations?  Well, no.   In fact, as real estate leveled off or declined in Southern California this past year or two, your home equity may have dramatically decreased.

SAFETY SOLUTION:  Again, a no-cost home equity line of credit-  Once established, it's good for ten years, regardless of the price of your home.  You've "locked-in" the profit of your home without selling it.

RETURN:  Here's the bad part.  Equity in a Long Beach real estate property offers a poor investment return.  Note that I didn't say Long Beach real estate was a bad investment.  I said that the EQUITY in a Long Beach home offers a poor return.  Equity in any property offers a poor return.  I personally think that Long Beach real estate is an excellent long-term investment; it's the equity, illiquid and subject to market fluctuations offers NO return on your investment.

RETURN SOLUTION:  Consider leveraging that home equity into a growth investment.  We can point you to some excellent investment advisers or Laurie Manny can show you some well-priced properties in Downtown Long Beach to "enhance" the return on the dead equity.

TAX STATUS:  Well, home equity offers no tax advantages unless leveraged and reinvested.  Here is where you have to be careful because the IRS has specific rules about deductibility of mortgage interest.  We'll point out the laws, question your strategies, and refer you to a tax-planning specialist when appropriate.

TAX STATUS SOLUTION:  Well, as always, careful planning, incuding your CPA or tax adviser is necessary.

CONCLUSION:  The equity in your Long Beach property probably doesn't meet the LSR-T test for a good investment.  Consult with a Mortgage Planner, Realtor, tax professional, and financial adviser to change that.

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