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
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Ownership of property transfers from the seller to the buyer when the parties sign the contract. ...
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Individual with legal privileges and obligations. The legal term is sometimes used for a corporation. ...
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Owned by one individual or sole ownership. ...
Managing property directly at its location. The management functions may include showing prospective tenants the facilities, collecting rents, and doing upkeep on the property. ...
Interest rate on a loan that varies periodically based on some related measure. If interest rates are currently high and a prospective buyer of a home believes future interest rates will be ...
The external covering finish of a structure which protects it from the elements. Exterior finish materials, including shingles, siding, and paints, are design to resist severe weathering ...
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