Equity

Definition

Equity is the difference between a property's fair market value and the total liens and debt against it. On a property worth $400,000 with a $250,000 first mortgage, equity = $150,000. Equity grows through three mechanisms: (1) principal pay-down on the mortgage, (2) appreciation in market value, (3) value-add through renovation. The combined effect — sometimes called 'forced appreciation' — is the central thesis of the BRRRR strategy: rehab a distressed asset, recapture equity through cash-out refinance, and recycle the recovered capital into the next deal.

Worked example

Buy a distressed property for $200,000 with $40,000 down + $160k loan. Spend $50,000 on rehab (paid in cash). All-in cost = $250,000, debt = $160,000, equity = $90,000. After rehab, property appraises at $360,000. Equity is now $360,000 − $160,000 = $200,000 — $110,000 of forced equity created through value-add.

How DealIntel uses it

DealIntel reports equity created on every fix-and-flip and BRRRR scenario alongside ROI and IRR. The platform separates 'equity at close' (forced appreciation from the rehab) from 'equity at exit' (which includes market appreciation during the hold period) so operators can underwrite the rehab math independently of market timing.

Related terms

• Loan-to-Value · LTVThe ratio of a loan amount to the appraised value of the underlying property.
• After Repair Value · ARVThe estimated market value of a property after planned renovations are complete.
• Buy, Rehab, Rent, Refinance, Repeat · BRRRRA long-hold real estate strategy that recycles capital through a cash-out refinance after stabilization.

DealIntel's underwriting team builds and maintains the platform's six-strategy engine, 25-point kill list, and Monte-Carlo financial model. Every piece of long-form content on dealintel.io is reviewed by an underwriter with direct experience scoring residential investment deals.