Forced Appreciation

One of my favorite reasons to use real estate as an investment vehicle is forced appreciation. In real estate, there are two types of appreciation.

There is market appreciation, or the value that is gained because the whole market goes up. Then there is also forced appreciation, which is value that is gained because the property is improved.

\One way to think of market appreciation is that it is similar to how buying a stock or ETF would rise and fall typically as the whole market goes.

Market Appreciation

There are a variety of strategies you can use to cause forced appreciation. Being able to cause more appreciation than additional capital expenditure is the challenge. So choosing a strategy wisely and executing it diligently is critical.

Forced Appreciation

Without the forced appreciation aspect a million dollar property with a 3% market appreciation for 10 years would be worth 1.35 million. Creating only $350,000 in value over the course of 10 years.

What About the Long Term?

By creating 30% of value, that is something you can then go to a bank and refinance based off of. You can then put much of that increased value back into your pocket to invest again.

Forced Appreciation is Like Climbing the Stairs