True Net Equity™ Explained
See exactly what happens to your equity when you sell — the eight deductions that turn your paper number into your real walkaway number.
The 8-Step Equity Waterfall
Watch the property value flow downhill through every selling cost and tax. The number at the bottom is True Net Equity™ — the actual cash that hits your bank account.
Demo numbers shown above. The full app calculates True Net Equity™ from your real property data — mortgage, basis, depreciation taken, and tax bracket all included.
Why True Net Equity™ Changes Everything
Once you know your real walkaway number, every return percentage you ever calculated changes. Compare ROEQ™ (Return on Equity) against ROTNEQ™ (Return on True Net Equity™) on the same property:
| Return Stream | $ / year |
The Wrong Way
ROEQ™
|
The Right Way
ROTNEQ™
|
|---|---|---|---|
|
Appreciation
|
$12,750 | 15.97% | 34.36% |
|
Cash Flow
|
$3,240 | 4.06% | 8.73% |
|
Debt Paydown
|
$4,100 | 5.14% | 11.05% |
|
Cash Flow from Depreciation™
|
$2,618 | 3.28% | 7.06% |
| Total Annual Return | $22,708 | 28.45% | 61.20% |
| Denominator (what you divide by) | Raw Equity $79,821 | True Net Equity™ $37,102 |
ROTNEQ™ is always higher because the denominator is smaller.
Raw equity assumes you keep every dollar at sale. True Net Equity™ reflects what would actually walk away — so when you measure return against it, you see the real opportunity cost of leaving capital tied up. A property earning a thin 28% on equity is suddenly a 61% performer when you measure it the right way.
The Eight Things That Eat Your Equity
Most investors only know two: mortgage and commission. True Net Equity™ pulls all six others into the open so nothing is hiding when you sit down at the closing table.
Mortgage Payoff
Your remaining principal balance — not just the original loan amount, but principal as of the closing date.
Listing & Buyer Commissions
Typically 5–6% combined of sale price. The single largest selling cost on most deals.
Title & Escrow Fees
Title insurance, escrow services, and settlement charges that appear on every closing statement.
Transfer & Recording Taxes
State and local taxes triggered by the transfer of ownership — often overlooked in back-of-envelope math.
Capital Gains Tax
Federal (and often state) tax on the appreciation above your adjusted basis. Long-term rates apply if held over a year.
Depreciation Recapture
25% federal recapture on every dollar of depreciation you claimed while you owned the property.
Inspection & Repair Credits
Buyer-requested credits and seller-paid repairs negotiated during the inspection period.
Seller Concessions
Closing-cost help, prepaid HOA, or rate buydowns the seller agrees to in exchange for a higher contract price.
Why Investors Use True Net Equity™
Knowing your actual walkaway number reshapes how you decide between holding, selling, refinancing, and 1031–exchanging.
Make Sell-or-Hold Decisions Honestly
If only $37k of your $80k raw equity will actually walk out the door, the redeployment math changes overnight. Stop comparing apples to oranges.
No Surprises at the Closing Table
Depreciation recapture and capital gains catch most investors off guard. True Net Equity™ surfaces both before you sign the listing agreement.
Compare Refi vs. Sell with Real Numbers
A cash-out refi extracts equity tax-free. Selling extracts it after seven layers of friction. Side-by-side, the right move is obvious.
Calculate Your Own True Net Equity™
Enter your properties, your mortgage balances, and your tax bracket — the analyzer walks every dollar through the same eight-step waterfall and shows your real walkaway number.
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