Discover how appreciation, one of the key factors that sets real estate apart, boosts property value over time. Unlike many other tangible assets, like cars that tend to love value over time, real estate tends to increase in value with time. Take advantage of this opportunity to learn about what makes real estate such an incredible wealth generator.
Welcome to the next lesson.
Appreciation.
Something that we covered in one of the prior lessons is that appreciation is one of the components and ways in which real estate pays, quote-unquote, the owner, and for anyone unfamiliar with real estate or appreciation in general, it simply represents an increase in value over time.
And so a lot of things can appreciate. So real estate being often the one we think of most commonly, tends to appreciate, or tends to be worth more over time. The opposite of appreciation is depreciation with time. And we’re going to get into depreciation as far as a tax benefit is concerned in a little bit. But that’s not what we’re talking about here. We’re simply talking about the value of an asset.
And so real estate tends to be an appreciating asset, increases with value over time versus something like a car or a boat, not a collector car, but a traditional car that we would just drive every day or a boat, those tend to be depreciating assets in that after you buy them, they tend to be worth less. And so if we think about a car, that would go by new from the dealership. And then we try to sell it four years down the road. It’s likely going to be worth less than it was than what we paid for it. Now, barring the pandemic and all those sorts of things, because that changed the car market quite a bit, especially the used car market quite a bit.
But outside of those, those type of events, that’s a traditional depreciating asset versus real estate. If you go buy a property brand new from the builder-developer, hold it for four or five years, and then go to sell it, assuming we’re not in a recession or depression and things have been going well in the economy, you can likely sell it for more than you purchased it for. So that’s appreciation.
This is a concept that we’re going to be talking a lot about throughout the academy. So I want you to be semi-familiar with it. But again, if you’re totally, totally foreign, not a big deal, we’re going to be covering it lots throughout here.
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