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
Obligation taken on by a person who did not obtain it originally, but agrees to honor the terms of the existing obligation as a condition for the transaction. By assuming the loan rather ...
An asset. The term cost is often used when referring to the valuation of acquired property. When it is used in this sense, a cost is an asset. Concepts of cost and expense are often ...
An adjustment to the internal rate of return (IRR) computation so as to improve this measure. This uses a risk-free after-tax rate and a customary rate for money reinvestment. ...
Literature, samples, equipment, tools, and other useful information that real estate brokers or agents can use for demonstration purposes to prospective buyers. ...
In general terms, a licensee means a person or legal entity who has received authorization or permission to perform a particular activity through another party (the licensor in our case.) ...
Legal document that conveys real estate to the lender after the borrower defaults on his or her mortgage payments. The borrower should demand cancellation of the unpaid balance and a ...
The accelerated depreciation definition is a type of depreciation that makes it possible for a homeowner or real estate investor to depreciate their property faster than the straight-line ...
Concept used in valuing real property that conditions may be altered requiring a revised estimate of market value. These conditions include a shift in the demand/supply relationship, ...
Combination of two or more real estate brokerages into one, with only one company retaining its identity. Typically, the larger of the two companies is the company whose identity is ...
Have a question or comment?
We're here to help.