Property Appreciation
Appreciation, or property appreciation in real estate is the increase in the value of a property or asset over time. This increase in value can be due to a number of factors; inflation, population growth, economic growth of an area, etc. Property appreciation can occur under a variety of different circumstances and with virtually any piece of real estate. Appreciation is the opposite of depreciation. Let’s explore some examples of appreciation in real estate.
Examples of property appreciation in real estate
Joan is a young woman in her early 30’s. After finishing a masters degree in finance, Joan finds an excellent job with a good salary at a stock brokerage company. As she nears her mid thirties, her house is paid off and she has saved up a tidy sum of money. With her savings, Joan invests in a cozy little bungalow in the suburbs, spending a reasonable sum of $125,000.
After finding a tenant and contracting a property management service, Joan begins to reap the rewards of her investment. However, after a few years of being a landlady, Joan tires of the responsibility and stress of maintaining the property, and decides to sell. After contacting a real estate agent and finding a buyer, Joan manages to get $225,000, making a tidy profit of $100,000.
The cause for this higher price is what is known as property appreciation. During the time that Joan had owned the house, a mall had been built nearby, a new movie theatre opened and an office complex newly constructed. The resulting demand for housing caused the value of Joan’s house to go up, without her even having to do anything.
Popular Real Estate Terms
person designating an agent to act for him. Primary individual having full financial liability. Amount being risked in a real estate investment. Owner of a real estate business. ...
Economic resource that is anticipated to provide benefits to a business. ...
Credit note which a lender's only security is the borrower's personal financial situation and credit history. ...
revising the terms of a loan such as when the borrower is experiencing severe financial difficulties. For example, a homeowner lost his job and seeks relief by requesting the lender ...
Received immediately when an investment is made or contract signed. For example, a real estate limited partnership may require that an investor pay a 3% sale fee at the time of initial ...
Individual who attempts to maximize his or her profitability by investing which the anticipation that a particular investment will go up in value. A speculator will generally be willing to ...
Individual or entity that divides up a large piece of owned land into smaller pieces generally for the purpose of developing them into homes for sale in the future. ...
A cost of funds index that most adjustable rate mortgages written in California in recent years are tied to. Computed by the Federal Home Loan Bank of San Francisco, it reflects the cost ...
An account into which payment is made for particular expenses to assure that money will be available. An example is a special account the homeowner's attorney establishes for advance ...
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