InvestingAll terms starting with A
Appreciation
An increase in a property’s value over time, from market movement or from improvements made to it.
Market appreciation comes from conditions outside your control. Forced appreciation comes from work you do: renovation, better management, raising below-market rents.
Appreciation is unrealized until you sell or borrow against it, and it is not guaranteed. Treating projected appreciation as the reason a deal works turns an investment into a bet on the market.
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Related terms
- EquityThe difference between what a property is worth and what is owed against it.
- CAGR (Compound Annual Growth Rate)The smoothed annual rate at which a value would have grown to reach its ending amount over a period.
- ROI (Return on Investment)Total return relative to what was invested, usually including cash flow, principal paydown, and appreciation.
- Cash flowWhat remains each month after rent has covered operating expenses and debt service.
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