Is your net worth negative?!

[Bill Goodland]

So as I am gaining personal finance and real estate knowledge I have certainly developed a strong appreciation for tracking your net worth and cash flow and the importance of both. I know a lot of peoples goals are to strictly increase their net worth or cash flow, with greater cash flow usually coming from leverage.

My question is how net worth is calculated. All other assets and account balance aside, lets say I control 1 million dollars worth of strong cash flowing properties with 40% equity across my portfolio, or 400k. Since net worth is essentially Assets-Liabilities, and a mortgage is a liability; does that mean that in this hypothetical situation, having 400k in assets(equity in property) - 600k liability(mortgages), that my net worth would actually be negative?

[Joe J.]

@Bill Goodland Your assets would be $1M, liability $600k and equity $400k so no you would not be negative.  Only way you would be negative is borrowing more than the property is worth, or the value of the property going down below the loan amount.  Assets does not equal equity.