Show090: What is forced appreciation? Does it work?

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What is Forced Appreciation

There are a lot of strategies that an investor can have in their investing toolbox. These strategies help make an investor more savvy and confident.  A fairly popular strategy used by both rookie and seasoned investors it to buy a property that is below market value, do some repairs to force appreciation, so the value of the home goes up.  Then the investor has instant equity in the property and could potentially even take cash back out of the property to roll into a new property.

In this episode of the podcast, we talk about what is forced appreciation vs. natural appreciation. The concept that natural appreciation is really the natural trajectory of the real estate market.  It may take years for a property to naturally appreciate in value due to market conditions.  On the flip side, by forcing appreciation in buying low and making some repairs, you can find that it can be rather easy to force some appreciation to a property.

We share the case study of one of properties that we used this exact strategy for (and it was our very first true investment property that we bought).  We bought the property, distressed below market value.  We spent about two months, on weekends, repairing the property to get it ready to be rented.  It was rented immediately after we were done repairing it and after about 8 months we did a cash out refinance and took nearly 70% of our initial investment back out of the property so we could roll it into another deal.

The best part about this strategy is that it is pretty simple.  You need to know your market you're investing in to know if you're getting a property below market value, but any investor-seasoned or newbie- can find success with this.

 

 In the show we discuss:

=>what is forced appreciation

=>what is natural (market) appreciation

=>does it work as a strategy for investing

=> and more...

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