Alright, last one, I promise. We’ve covered assets, we’ve covered liabilities, now it’s time for equity.
In accounting, liabilities and equity are assets, so equity is equal to assets-liabilities. In other words, this is the net value of a business. Another definition of equity relates to real estate, I recommend all my readers to acknowledge the presence of equity in real estate for it is quite a powerful investment consequence.
In real estate, equity is the total value of a property minus all money owned on it, as usual, let’s look at an example:
Leroy bought a home ten years ago, it’s value is $300,000 and he owes a $150,000 mortgage on it. Leroy is current on all other expenses. Leroy Therefore has $300,000-$150,000 = $150,000 in equity. This is important, and awesome, because Leroy can now borrow against his home’s equity to fund other investments.
If you’re interested in starting your journey to financial independence and success, I highly recommend picking up Rich Dad Poor Dad, here’s an affiliate link to purchase it on Amazon, you would be supporting me too!
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The 10X Rule: The Only Difference Between Success and Failure