Included here are few basic words you will frequently use when on the path to purchase a property. Knowing them will ultimately assist you in your negotiations.
Appreciation & Depreciation
Appreciation and depreciation are terms that apply to the values of stocks, bonds, currency, and real estate. These two terms relate to the increase and decrease of these values over time. In real estate, appreciation is determined by the combination of strong demand and weak supply of properties. It also follows changes of interest and inflation rates.
Over time, the land and all structures in your property usually gain more value. However, the actual building can also depreciate. This happens when the structure of your home ages and receives wear and tear. On the other hand, land rather appreciates than depreciates. However, the speed with which it does depends on the location of the property.
Knowing the appreciation and depreciation values of your would-be home helps you decide if it’s the correct one to purchase.
If you are a real estate investor, knowing this is a must!
Real estate investments are assets that tend to appreciate and you use your depreciation as a taxable expense when fining for your yearly taxes. This works perfectly if you are buying cash flow properties to keep them for your rental portfolio.