What is the owner's net worth in relation to a property, considering the market value and any liens?

The owner's net worth in relation to a property is referred to as equity. Equity represents the difference between the market value of the property and any outstanding liens or debts secured against it, such as mortgages. In other words, equity is the portion of the property that the owner truly owns free and clear.

For example, if a property has a market value of $300,000 and the owner has a mortgage of $200,000, the equity would be calculated as $300,000 (market value) minus $200,000 (debt), resulting in $100,000 in equity. This concept is crucial for homeowners because it reflects their investment in the property, which can increase over time as the property appreciates or as the mortgage is paid down, thereby increasing their net worth.

This understanding contrasts with the other terms: return refers to the gain from an investment over time, appreciation pertains to the increase in value of the property, and net income is related to the profitability of an investment rather than the owner’s direct stake in a property.