Definition of "Trading on equity"

Michele Miller real estate agent

Written by

Michele Millerelite badge icon

Real Living Carolinas

Also called financial leverage. The use of borrower funds to magnify return. Trading profitably on the equity, also called favorable financial leverage, means that the borrowed funds generate a higher rate of return than the interest rate paid for the use of the money. The excess accrues to the benefit of the owner because it magnifies, or increases, his or her earnings.

image of a real estate dictionary page

Have a question or comment?

We're here to help.

*** Your email address will remain confidential.
 

 

Popular Real Estate Terms

Founded in 1939 and located in Washington, DC, the NAA has 36,000 members with 11 regional groups. It consists of 60 state and local associations of managers, investors, developers, ...

As a collective noun, land cost means the total cost of purchasing a parcel of land or lot with specific land use and ownership. The land cost includes the purchase price, closing costs, ...

How much of an investment made in real estate has been recovered expressed in dollars or in percentage terms. ...

Placed by the federal government on a individual's real property for federal estate tax or income tax law violations. In the case of a federal estate tax lien, upon the owner's death, the ...

Unimproved property. It has no utilities, sewers, streets, or structures and usually must be cleared. ...

The definition of the price-to-rent ratio is very important for real estate investors. This ratio is a measurement for the affordability of a particular rental property and tells investors ...

Substance developed from a binding cement medium with stone particles compacted together. After concrete hardens, its characteristics are very similar to stone. Concrete is an essential ...

Property pledged to obtain a loan or credit. ...

Matters that need to be rectified in a home or building prior to its sale or acceptance by a new owner. For example, a leaking water pipe should be repaired prior to showing the property to ...

Popular Real Estate Questions