Equity is calculate by subtracting liabilities from an asset's value.  In real estate, equity is the portion of a property's value that is owned by the investor, after accounting for any debt associated with the property. For example, if a property is worth $1,000,000 and the investor has a $500,000 mortgage on the property, the investor's equity in the property is $500,000. Equity can be increased through appreciation, or by making improvements to the property.