What does "equity" refer to in real estate?

In real estate, "equity" specifically refers to the difference between the market value of a property and the outstanding balance on any liens, such as the mortgage. This concept encapsulates the financial interest that the owner has in the property. For example, if a property has a market value of $300,000 and the owner owes $200,000 on their mortgage, then the equity in the property would be $100,000.

This definition highlights the owner's stake in the property, which can grow as they make payments on the mortgage or if the property appreciates in value. Understanding equity is crucial for property owners, as it can impact refinancing options, investment opportunities, and overall net worth.

In contrast, the other choices do not accurately capture the definition of equity. The total amount of investment in a property refers to the overall financial outlay and does not account for the current mortgage balance. Rental income is distinct from equity, as it represents the cash flow generated from leasing a property rather than the owner's stake in it. Full ownership rights pertain to the legal ownership of the property but do not specifically denote the financial interest represented by equity.