Upside Potential
Definition of "Upside potential"
In general terms, the upside potential signifies the potential of a present investment, be it an asset or property, to bring a profit for the investor in the future. This measure enables companies and individual investors to decide whether purchasing or financing a project is worthwhile.
You can encounter one example in the financial world in the form of securities and stocks. Upside potential is a potential gain you can expect from security (equity, debt, and derivatives.) For instance, a financial analyst will advise you on buying stock trading at $20 per share. Still, the same stock has an upside potential of $27 later. Certainly, there’s no certified guarantee that the estimated growth in value will occur.
Upside potential in real estate
Upside potential in terms of real estate means the best-case scenario investment-wise. It defines an approximation of the possible appreciation of value in real estate. The local assessor would consider several factors in evaluating the upside potential in your property value. Thus, they will assess your location, nearby amenities, and a potential increase in rental income. Even home security can affect property value. Government developments in the area can significantly affect future real estate investment appreciation.
We recommend following local real estate agents’ lead when they say a property has upside potential. It is a term that every homebuyer should know. When appreciating a house, expert realtors refer to the possibility of gaining profit in the future based on the present evaluation of the said real estate and its neighborhood.
Incurable depreciation
People often mistake incurable depreciation and believe it’s the exact opposite of the meaning of upside potential. However, depreciation doesn’t define a drop in value. The term means the repair expenses are higher than the property’s actual value. In other words, that’s how professional assessors communicate with the homeowner that it is not worth spending money on property renovations. Unfortunately, even home inspectors miss certain real estate aspects that can be costly. To dodge the devaluation of your property, you should take essential preventive measures.
Downside risk
The opposite of upside potential is downside risk, which approximates the possible comparative decline in property value. Real estate investors always evaluate individual properties in terms of the upside potential compared to the downside risk.
Popular Real Estate Terms
In legal terms, the definition of null and void (“void ab initio”) can describe an agreement that has no force or binding power. Therefore, it’s neither valid nor legally ...
Additions made to a structure to protect it from damage due to inclement weather. An example is reinforcing the wood surrounding windows. ...
Documentation of zoning requirements and changes thereto. ...
Charges resulting in involuntary encumbrances against real property derived from legislated law rather than from debts owed to organizations o r individuals. For example, of a homeowner ...
Property title having no encumbrances. In the usual sense this means a title not having a mortgage. Other encumbrances could include judgments or additional financial liens. ...
Same as term annuity: Equal period payments or receipts. Examples of an annuity are annual rental receipts from a real estate investment and cash dividends from a real estate firm's ...
Unable to sell an investment to obtain cash in the short-term without incurring A significant loss. Real Estate is typically not liquid because of the inability to sell property to raise ...
Rights granted to owners of property restricted to conservation use, historic preservation, or some other low density function to sell to other landowners allowing them to develop their ...
The total expenditures required to make a locality suitable for the designated purpose. An example is how much it would cost to build a shopping center on a lot. ...
Have a question or comment?
We're here to help.