Appreciation in Property Values
Today I want to chat with you about Appreciation in Real Estate. Appreciation basically means your property is worth more at a particular time vs. what you paid for it.
I think this topic is quite relevant in today’s economy, because as we all know inflation is on the rise. While inflation isn’t great when buying things… it can be a huge positive for real estate investors. One benefit of inflation on rental property values is appreciation. Keep in mind though, a number of other factors affect this… including a growth in housing demand in a specific location, upgrades to the property and general market conditions.
Appreciation for landlords has the following advantages:
Equity Gain: The landlord gains more ownership interest in a property as its value rises. For landlords who might want to use that equity for upcoming investments or to obtain financing for other properties, this can be advantageous.
Higher Sales Price: Appreciation may lead to a higher sales price if a landlord decides to sell the property. For landlords who have held the property for a long time and have experienced a large increase in value, this can be especially lucrative.
Refinancing: Landlords may find it simpler to refinance their mortgages as a result of appreciation… based on the current loan to value. By doing so, landlords can free up cash for investments in new properties or renovations of current ones.
Benefits for Taxes: Landlords may pay less tax as a result of appreciation. The value of a landlord’s rental property may be written off over a 27.5-year period according to the IRS. This depreciation can negate rental revenue the landlord receives, lowering their tax obligation.
Increased Rental Income: As the property’s value rises, landlords most likely will be able to raise rent prices, which would enhance rental income.
It’s important to remember that landlords, can increase the likelihood of appreciation in their properties by keeping a close eye on market trends and making strategic well timed decisions.
