Appreciation

Appreciation is the increase in value an asset experiences over a specified time period or the change in value of a property investment. Appreciation is calculated by subtracting the investor’s original purchase price from the current value of the property, expressed as a percentage. If additional capital investment has been made to the subject property, Appreciation is calculated by subtracting the original purchase (price plus the additional capital investment) from the current value of the property. In either case, calculating Appreciation may result in either a positive or negative number. A positive number derived as a result of this calculation is described as positive Appreciation, and a negative number derived as a result of this calculation is described as negative Appreciation. For example, a property purchased for $100,000 that is currently valued at $200,000 has realized 100% positive Appreciation. In this example, the Appreciation of the property is $100,000. Contrarily, a property that was purchased for $100,000 that is now valued at $90,000 has realized a negative 10% Appreciation. In this case the Appreciation is -$10,000. As a term in real estate, this second example is used to distinguish negative Appreciation from depreciation.