FORCED APPRECIATION

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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 of my favorite reasons to use real estate as an investment vehicle is forced appreciation.

Market Appreciation

Market appreciation is the gradual increase in value of every property in the market. It is driven by large macroeconomic factors such as population growth, job growth, unemployment, taxes, and other factors typically outside of the direct influence of the investor.

Forced Appreciation

While market appreciation is a gradual increase in value, forced appreciation comes in a much shorter timeframe. It is appreciation that comes from improving the property or improving the management of a property.

What About the Long Term?

Forced appreciation typically is incremental and occurs with bursts of activity. It can even be paired with market appreciation for more dramatic results.

Forced Appreciation is Like Climbing  the Stairs

Forced appreciation is repeatable. 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.

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