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This episode is a business coaching course that explains what appreciation potential is in regards to real estate.

Results-Focused Training, Tools, and Workshops from Expert Business Coaches.

Featured Coaching Excerpt - Notes & Transcript, Part 1
  • Definition Magician: Appreciation Potential: The possibility or probability that a real estate investment will increase in value during the holding period.

business real estate mentoring on Thrive15.com, an alternative to Lynda.com

[MUSIC PLAYING]

-We are here on Thrie15.com, an with Michael "there is really no real estate topic too obscure" Burer, and we are talking about appreciation potential. And, really, we could be long boarding, we could be swimming, we could be--

MICHAEL BURER: We're here.

-There's a lot to do, yeah. But we have chosen to be here, and I appreciate you for being here my friend.

-Honored to be here.

-So here we go. I'm going to read the definition, and I'm excited to hear your ample example. So here we go.

"Appreciation potential. The beautiful possibility or probability that a real estate investment will increase in value during the holding period." Can you just explain to us what that means, my friend?

-Well, appreciation is hopefully why you're buying real estate. Appreciation refers to the increase in value in a building. So if you buy a for $100,000, and it increases to $150,000, you had $50,000 in appreciation. Appreciation potential refers to, well, maybe on the front end of the investment, what you think that that increase could be.

-OK, so let me ask you now. So if I'm a Thriver, and I have a business, and I've been leasing for a while, and I'm contemplating about whether should I buy it or should I continue leasing it. How does appreciation factor into that decision making process?

-So when you do your cost benefit or comparison between renting versus owning, one of the factors that would come into the "own" scenario would be your expectation of the increase of value that that piece of real estate would have over time. You could reasonably expect, I'm going to buy it for a million dollars, and over time, due to the markets and inflation, it's going to be worth a million and a half.

-Do people ever buy properties-- do you ever see in commercial real estate where they buy a property and it actually depreciates over time?

-It certainly happens quite a bit, but no one buys real estate where they expect that to happen.

-Example. There's shopping centers I see that are always, like, perpetually unreleased, or there's a shopping center that's in an area that's getting bad, maybe it's an area that's kind of bad, but it's getting worse, that kind of stuff would be depreciation, right?

-Correct.

-It would affect the value and make it worth less?

-It'll decline. Yep.

-OK. And I don't know that this is actually the definition of appreciation, but I feel like the definition of appreciation is just how I feel for you.

-That works. That works.

-Thank you so much.

Boom.

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