Forced appreciation

What is forced appreciation? Every one has heard of appreciation in real estate. That is where things just go up in value over time, but can this be foreced?

The answer is yes and this is how you do it. Say you buy a $1,000,000 income producing property with a cap rate of 8%. Cap rate in this example simply means if you paid $1,000,000 cash your property nets $80,000 per year.

You go into this million dollar investment and you cut your garbabe bill from $800 per month to $200 per month. The savings is $7200 per year. Because you own a property of 5 units or more the appraiser has to use the income appraisal approach. This simply means they use income to determine the value of the investment.

So you take $7200 and divide it by the cap rate of 8%. You just raised the value of the property by $90,000.

John Dessauer, the guy who teaches this class, asks why would you invest in the single family market where the velocity of money is so slow. Velocity of money simply means how fast your money works for you.

Thanks Burke Bennett
http://www.seidahohomes.com
208 589 5599
burkebennett@hotmail.com