{"id":72385,"date":"2021-09-01T09:30:00","date_gmt":"2021-09-01T15:30:00","guid":{"rendered":"https:\/\/www.biggerpockets.com\/renewsblog\/?p=72385"},"modified":"2023-03-23T08:45:04","modified_gmt":"2023-03-23T14:45:04","slug":"forced-appreciation","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/forced-appreciation","title":{"rendered":"What Is Forced Appreciation? Here&#8217;s the Good, the Bad, and Everything Else"},"content":{"rendered":"\n\n      <iframe loading=\"lazy\" frameborder=\"0\" height=\"200\" scrolling=\"no\" src=\"https:\/\/playlist.megaphone.fm?e=BIGPOC9934599387&#038;light=false\" width=\"100%\"><\/iframe>  \n\n\n\n\n<p class=\"wp-block-paragraph\">If you\u2019re like most investors starting out, you\u2019ve run a few numbers and come up with an acceptable price, condition, and location for an investment property. The next step is to set up an internet search that emails you when these properties come available. Piece of cake. Now all you have to do is just sit back and wait for good deals to come your way, right?<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Wrong.<\/em> The problem with armchair investing is that everyone else is doing the same thing. We all use the same numbers, come to the same conclusions, and access the same software to do searches. In general, if it\u2019s easy, more people will do it, increasing competition and driving down profitability.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">This is why you need to consider investing in properties that do not look like good investments. Of course, you can\u2019t just invest in any old property. You need to know what to look for.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Once you find a promising property to invest in, you need to focus on things that will allow you to increase the value of that property. Smart investors understand how to add value to an asset, therefore forcing appreciation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">What is forced appreciation?<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Forced appreciation happens when the investor (you) controls the value of an investment property due to the increase in net operating income (NOI), which is the money your property generates. You increase NOI in one of two ways:<\/p>\n\n\n\n<ul class=\"wp-block-list\">\n<li>Decrease your operating expenses<\/li>\n\n\n\n<li>Increase your rental income<\/li>\n<\/ul>\n\n\n\n<p class=\"wp-block-paragraph\">Basically, forced appreciation is buying something that\u2019s not a good real estate investment property and making it into a good investment. Armchair investors are not looking for or bidding on these homes, which reduces competition and increases profitability.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now that we\u2019ve defined forced appreciation, let\u2019s compare it with natural appreciation.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n  <div id=\"posts_lists-block_611c0ccebdf20\" class=\"  my-10\">\n    <div class=\"\">\n      <!-- Column One -->\n      <div>\n                  <h2 class=\"mt-0 mb-1 js-toc-ignore\">\n            More on appreciation from BiggerPockets          <\/h2>  \n                  \n        \n        \n        <div class=\"grid grid-cols-1 gap-y-4 lg:gap-y-7 mt-5\">\n          \n<article \n\tid=\"post-118354\" \n\tclass=\"content-card mb-0 flex flex-col  post-118354 post type-post status-publish format-standard has-post-thumbnail hentry category-real-estate-investing-for-beginners\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/investing-real-estate-appreciation-only\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"338\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/AdobeStock_271297130.jpeg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"Is It Wise to Invest in Real Estate for (Nothing but) Appreciation?\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/AdobeStock_271297130.jpeg 6000w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/AdobeStock_271297130-300x200.jpeg 300w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/AdobeStock_271297130-768x512.jpeg 768w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2019\/10\/AdobeStock_271297130-1024x683.jpeg 1024w\" sizes=\"auto, (max-width: 338px) 100vw, 338px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/real-estate-investing-for-beginners\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Investing For Beginners<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">5 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/1689.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2019-10-31T12:00:20-06:00\">Oct 31, 2019<\/time><time class=\"updated\" datetime=\"2021-03-16T14:56:44-06:00\">Mar 16, 2021<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/andrewsyrios' class='no-underline line-clamp-1' target=\"_blank\">Andrew Syrios<svg class=\"h-5 inline ml-2\" viewBox=\"0 0 21 21\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><g clip-path=\"url(#a)\"><path d=\"M19.253 5.25a1.75 1.75 0 0 0-1.663 2.29l-1.42.902a2.188 2.188 0 0 1-2.868-.46L11.91 6.28a1.73 1.73 0 0 0 .342-1.03 1.75 1.75 0 1 0-3.5 0c0 .37.12.732.34 1.03L7.701 7.982a2.188 2.188 0 0 1-2.868.46l-1.42-.903a1.75 1.75 0 1 0-1.816 1.203l1.035 6.205a.438.438 0 0 0 .43.366H17.94a.437.437 0 0 0 .431-.366l1.035-6.204a1.75 1.75 0 0 0-.153-3.494Z\" fill=\"#FFC107\"\/><path d=\"M10.502 17.064c4.108 0 7.438-.98 7.438-2.188 0-1.208-3.33-2.188-7.438-2.188-4.109 0-7.439.98-7.439 2.188 0 1.208 3.33 2.188 7.439 2.188Z\" fill=\"#FFA000\"\/><path d=\"M10.502 17.501c-3.915 0-7.877-.901-7.877-2.625s3.962-2.625 7.877-2.625c3.914 0 7.876.9 7.876 2.625 0 1.724-3.962 2.625-7.876 2.625Zm0-4.375c-4.597 0-7.001 1.137-7.001 1.75s2.404 1.75 7 1.75c4.597 0 7.002-1.138 7.002-1.75 0-.613-2.405-1.75-7.001-1.75Z\" fill=\"#FFD54F\"\/><\/g><defs><clipPath id=\"a\"><path fill=\"#fff\" d=\"M0 0h21v21H0z\"\/><\/clipPath><\/defs><\/svg><\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/investing-real-estate-appreciation-only\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tIs It Wise to Invest in Real Estate for (Nothing but) Appreciation?\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">What if you invested in houses solely for appreciation\u2014without considering cash flow? Is this too big of a risk, or just risky enough to pay off? I&#8217;ll explain how to&hellip;<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"118354\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-118354 -->\n<article \n\tid=\"post-100880\" \n\tclass=\"content-card mb-0 flex flex-col  post-100880 post type-post status-publish format-standard has-post-thumbnail hentry category-deal-analysis\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/buy-fringe-maximize-cash-flow-appreciation\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"340\" height=\"163\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/07\/TheFringe.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"My Secret to Maximizing Cash Flow &#038; Appreciation: Buying on the Fringe\" srcset=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/07\/TheFringe.jpg 702w, https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2018\/07\/TheFringe-300x144.jpg 300w\" sizes=\"auto, (max-width: 340px) 100vw, 340px\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/buying-selling\/deal-analysis\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">Finding Deals<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">7 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/214710.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2018-07-31T16:30:37-06:00\">Jul 31, 2018<\/time><time class=\"updated\" datetime=\"2021-03-16T13:59:26-06:00\">Mar 16, 2021<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/benmizes' class='no-underline line-clamp-1' target=\"_blank\">Ben Mizes<\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/buy-fringe-maximize-cash-flow-appreciation\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tMy Secret to Maximizing Cash Flow &#038; Appreciation: Buying on the Fringe\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">The best results are often found by going where others won\u2019t. Find out how I generate 20% returns with appreciation potential by buying on the fringe.<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"100880\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-100880 -->\n<article \n\tid=\"post-136937\" \n\tclass=\"content-card mb-0 flex flex-col  post-136937 post type-post status-publish format-standard has-post-thumbnail hentry category-biggerpockets-daily\">\n\n\t<header class=\"entry-header\">\t\t\t\n\t\t<!-- Image -->\n        \t\t\t<a class=\"post-thumbnail\" href=\"https:\/\/www.biggerpockets.com\/blog\/property-appreciation-20-years\" target=\"\" aria-hidden=\"true\" tabindex=\"-1\" target=\"_blank\">\n\t\t\t\t<img loading=\"lazy\" decoding=\"async\" width=\"332\" height=\"225\" src=\"https:\/\/www.biggerpockets.com\/blog\/wp-content\/uploads\/2021\/04\/Property-appreciation-560x380.jpg\" class=\"size-card w-full  m-0 aspect-[68\/45] object-scale-down wp-post-image\" alt=\"How Much Has Real Estate Appreciated in 20 Years?\" title=\"\">\t\t\t<\/a>\n\t\t        \n\n\t\t<!-- Content Wrapper -->\n\t\t<div class=\"py-4 \">\t\n                            <div class=\"flex gap-4 justify-between items-center\">\n                    <!-- Category  -->\n                                            <a href=\"https:\/\/www.biggerpockets.com\/blog\/category\/biggerpockets-daily\" class=\"transition-colors bg-themeBlue\/20 text-themeBlue-medium hover:bg-themeBlue hover:text-white px-2 py-1 mb-2 inline-block rounded-sm no-underline text-sm\" target=\"_blank\">BiggerPockets Daily<\/a>\n                    \n                                            <span class=\"text-sm text-gray-500 hidden lg:inline-block\">2 min read<\/span>\n                                    <\/div>\n            \n           <div class=\"flex gap-3 items-center my-2 flex-nowrap text-base\">\n                <!-- Avatar and Author Name -->\n                <img decoding=\"async\" src=\"https:\/\/bp-wp-migration.s3.amazonaws.com\/author_avatars\/1689.jpg\" class=\"w-8 h-8 object-cover my-0 inline-block rounded-full\" alt=\"\" title=\"\"><span class='leading-snug text-slate-500 flex items-center'><span class='hidden whitespace-nowrap sm:inline-block md:hidden lg:inline-block pr-1'><span class='posted-on'><time class=\"entry-date published\" datetime=\"2021-04-26T15:30:00-06:00\">Apr 26, 2021<\/time><time class=\"updated\" datetime=\"2024-01-29T15:21:50-07:00\">Jan 29, 2024<\/time><\/span><\/span>&nbsp;<a href='https:\/\/www.biggerpockets.com\/blog\/contributors\/andrewsyrios' class='no-underline line-clamp-1' target=\"_blank\">Andrew Syrios<svg class=\"h-5 inline ml-2\" viewBox=\"0 0 21 21\" fill=\"none\" xmlns=\"http:\/\/www.w3.org\/2000\/svg\"><g clip-path=\"url(#a)\"><path d=\"M19.253 5.25a1.75 1.75 0 0 0-1.663 2.29l-1.42.902a2.188 2.188 0 0 1-2.868-.46L11.91 6.28a1.73 1.73 0 0 0 .342-1.03 1.75 1.75 0 1 0-3.5 0c0 .37.12.732.34 1.03L7.701 7.982a2.188 2.188 0 0 1-2.868.46l-1.42-.903a1.75 1.75 0 1 0-1.816 1.203l1.035 6.205a.438.438 0 0 0 .43.366H17.94a.437.437 0 0 0 .431-.366l1.035-6.204a1.75 1.75 0 0 0-.153-3.494Z\" fill=\"#FFC107\"\/><path d=\"M10.502 17.064c4.108 0 7.438-.98 7.438-2.188 0-1.208-3.33-2.188-7.438-2.188-4.109 0-7.439.98-7.439 2.188 0 1.208 3.33 2.188 7.439 2.188Z\" fill=\"#FFA000\"\/><path d=\"M10.502 17.501c-3.915 0-7.877-.901-7.877-2.625s3.962-2.625 7.877-2.625c3.914 0 7.876.9 7.876 2.625 0 1.724-3.962 2.625-7.876 2.625Zm0-4.375c-4.597 0-7.001 1.137-7.001 1.75s2.404 1.75 7 1.75c4.597 0 7.002-1.138 7.002-1.75 0-.613-2.405-1.75-7.001-1.75Z\" fill=\"#FFD54F\"\/><\/g><defs><clipPath id=\"a\"><path fill=\"#fff\" d=\"M0 0h21v21H0z\"\/><\/clipPath><\/defs><\/svg><\/a><\/span>            <\/div>\n\n            <!-- Post title -->\n\t\t\t<h2 class=\"entry-title js-toc-ignore mt-4 mb-0 text-xl leading-snug text-left\">\n\t\t\t\t<a href=\"https:\/\/www.biggerpockets.com\/blog\/property-appreciation-20-years\" rel=\"bookmark\"  \n\t\t\t\t\tclass=\"whitespace-normal no-underline font-bold  text-slate visited:text-slate hover:text-themeBlue\" target=\"_blank\">\n\t\t\t\t\tHow Much Has Real Estate Appreciated in 20 Years?\t\t\t\t<\/a>\n\t\t\t<\/h2>\n\t\t\t\n                        <p class=\"text-lg font-normal mt-3 text-slate-500 mb-1 line-clamp-3\">Today&#8217;s real estate market may appear irrationally hot. But these charts make it clear how powerful property investment can be over the long term.<\/p>\n\t\t<\/div>\n\t<\/header>\n     <footer class=\"flex justify-between mt-auto\">\n        <!-- Comment Count -->\n        \t\t<span class='flex items-center space-x-2 text-sm' x-cloak x-data='commentCount()' :class=\"parseFloat(commentCount) < 1 || commentCount == '' ? 'hidden' : 'flex'\">\n\t\t\n            <svg xmlns=\"http:\/\/www.w3.org\/2000\/svg\" class=\"h-5 w-5 text-slate text-opacity-50\" fill=\"none\" viewBox=\"0 0 24 24\" stroke=\"currentColor\">\n                <path stroke-linecap=\"round\" stroke-linejoin=\"round\" stroke-width=\"2\" d=\"M17 8h2a2 2 0 012 2v6a2 2 0 01-2 2h-2v4l-4-4H9a1.994 1.994 0 01-1.414-.586m0 0L11 14h4a2 2 0 002-2V6a2 2 0 00-2-2H5a2 2 0 00-2 2v6a2 2 0 002 2h2v4l.586-.586z\" \/>\n            <\/svg>\n\n            <span x-ref=\"comment_count\" class=\"disqus-comment-count text-slate text-opacity-80\" data-disqus-identifier=\"136937\">\n\t\t\t\t\t\t\t<\/span>\n        <\/span>\n\t    <\/footer>\n<\/article><!-- #post-136937 -->        <\/div>\n      <\/div>\n    <\/div>\n  <\/div>\n\n  \n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">Natural appreciation vs. forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Natural appreciation is fully dependent upon the market. Your investment property will not naturally appreciate unless the demand for property in your investment\u2019s location goes up.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Although you have no control over the natural appreciation for your investment property, you could come up with a rough guess about the outcome by researching and watching the market. It is definitely a gamble, though.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">On the other hand, forced appreciation is something you, the investor, can control. You can turn a larger profit with forced appreciation, and the process is much quicker than having to wait years and years for natural appreciation to <em>possibly <\/em>happen.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">In short, natural appreciation is a long process and is risky because it is dependent upon the market, whereas forced appreciation allows the investor to have control over the amount of time and the increase in value on an investment property.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The benefits of forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">Let\u2019s look at the following example of forced appreciation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you were to increase your monthly rental rates by $25 in a 100-unit property, and your capitalization rate, or cap rate (the expected rate of return on a real estate investment), was 6%, the value of your investment would increase by $500,000 in one year. In just four years, your property value would have increased by <em>$2 million<\/em>!<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The increase in real estate value means better cash flow and tax advantages for you, the real estate investor. Forced appreciation is actually the number one way that real estate investors become millionaires.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Additionally, since armchair investors are not looking to bid on these investment properties, which are not considered great investments, you will have less competition.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Another benefit of forced appreciation is not waiting for multiple years to have your investment appreciate solely based on the (fluctuating) market. Instead, since you control the appreciation, your property appreciates quickly.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">The drawbacks of forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The main drawback of forced appreciation is that it\u2019s typically a one-time benefit. You won\u2019t see the bulk of the financial return until you sell the property. However, forced appreciation is not only limited to property value\u2014as discussed\u2014so it also could be seen in smaller increments based upon increased rental income.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Another drawback is the amount of time spent analyzing potential properties. Learning what works in your area takes a lot of boring analysis. But once you figure it out, you\u2019ll be able to easily repeat the process or move on to finding other ways to force-appreciate properties. Very few people do this and miss out on great opportunities.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">The third drawback is the required specialized knowledge of forced appreciation. Think of the clich\u00e9, pithy statement your parents would quote to you as a kid: \u201cMoney doesn\u2019t grow on trees!\u201d In this context, it means if you want to get a good return on your investments, you have to be willing to put in the effort and time when researching potential properties and their locations.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You have to account for the cost and time it takes to do the research. You will want to learn from real estate mentors and understand the intricacies of finding the right property for a forced appreciation investment. You don\u2019t want to jump into this and learn as you go\u2014that would most likely turn into a HUGE financial problem for you.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now that you understand the good and bad of forced appreciation, let\u2019s discuss the role of rental income.<\/p>\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n\n\n<hr class=\"wp-block-separator has-css-opacity\"\/>\n\n\n\n<h2 class=\"wp-block-heading\">How to increase rental income through forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">At the beginning of your goal to force appreciation, you will want to start by increasing the rent of your properties. There are several solutions for making this happen.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Increasing the monthly rent<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">After a year, you want to look at increasing the monthly rent of a tenant. You will want to update your rent charges based upon the improvements you\u2019ve made to the property and upon the relativity of the current market.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Look at the rates your competitors charge and adjust your rates accordingly. You don\u2019t want to charge a rate that\u2019s too high, obviously, because you would be stuck dealing with vacancies.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Minimize your vacancy rates<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Keep in mind that the more you charge for rent, the more you are at risk for vacancies. It\u2019s worse to have no income from a vacancy than too little amount of income from a lowered rate.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you find your rates comparable to competitors in the area, you may just need to work on promoting your rental units. Potential renters may not know your property, especially if you renovated or restored a previous property.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can use the internet to market your properties or perhaps place enticing advertisements around the community where potential renters are sure to see them.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Provide more living space<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">If you convert a basement or an attic into an additional rental unit, you could potentially bring in twice the amount of rental income. Additionally, if you make more spaces inside a unit by adding a bedroom within the larger, existing space, or converting a garage into additional living space, you could charge more rent for your unit. Features like carpet and drywall significantly increase rents as well.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Even if your square footage stays the same and you convert a one-bedroom apartment into a two-bedroom apartment, people will be willing to pay more rent to have an additional separate room.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You always want to have your renovations and additions checked by licensed professionals to ensure your spaces are up to code and considered legal.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Airbnb rent<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">First, make sure short-term leases are legal in your state and that the property is a good choice for an Airbnb-type rental. Once you\u2019ve determined it is, make sure the property is in a prime location for attractions and positioned in an appealing neighborhood.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Airbnb rentals are great investments because, like a hotel, especially one located by attractions, you can charge much more rent per night than you would make from a monthly rental property.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">While amping up your rental income is one way to generate forced appreciation, you can also increase your property value.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to increase property value through forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">The best thing about forced appreciation is that you are not under time constraints or having to wait for your property to simply appreciate based upon the market. You can make additions or renovations to the property to increase its value, moving along at your own pace. Here are several modifications to consider.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Additional bedrooms<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Rather than squeezing an extra bedroom into a large, already existing space, you can consider just building onto your rental property. The increase in square footage makes your rental more valuable in the long run and allows you to increase your rental rates immediately.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Additional bathrooms<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">In addition to bedrooms, you should consider adding more bathrooms to your property. Generally, people choose units that include multiple bathrooms as opposed to an option with just one. You especially want to consider this if your investment is located in a highly competitive area.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Curb appeal<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Curb appeal is another thing to consider. People rent and buy based on emotion. You don\u2019t want their first impression of your unit to be disgust because it is covered in trash, weeds, junk cars, or chipped paint. You definitely want a fresh, clean look to impress.<\/p>\n\n\n\n<h3 class=\"wp-block-heading\">Multifamily properties<\/h3>\n\n\n\n<p class=\"wp-block-paragraph\">Another option is to rehab a cheap duplex while living there and then increase rents. Multifamily properties are valued based on the income they generate. Not only will you increase rental income, but also property value.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Now that we\u2019ve discussed some strategies for increasing your investment property\u2019s value, let\u2019s discuss how to determine your forced appreciation.<\/p>\n\n\n\n<h2 class=\"wp-block-heading\">How to calculate forced appreciation<\/h2>\n\n\n\n<p class=\"wp-block-paragraph\">To figure out your forced appreciation, follow this formula:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Forced appreciation = Net operating income (NOI) \/ cap rate <\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">You can calculate the cap rate through another mathematical formula:<\/p>\n\n\n\n<p class=\"wp-block-paragraph\"><em>Cap rate = NOI \/ current market value (CMV) <\/em><\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Cap rates are established by the other surrounding real estate properties in a particular geographic location relative to the amount of income generated by those properties.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Real estate properties in Seattle, for example, may have a low cap rate of 3% because buyers are willing to purchase properties that won\u2019t have a good cash flow.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">Typically, a good cap rate you want to look for before finalizing your investment is between 8% and 12%.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">I know an investor who would almost exclusively buy large three-bedroom homes that had no chance of cash flow. She would then create two more bedrooms (moving walls or converting garages) and one more bathroom in the house. At an average price of $500 a room (college students) in our area, she was able to turn a breakeven house into a $1,000-a-month cash flow with no competition. She has been buying at least one home a year for over 20 years just on the income from forced appreciation.<\/p>\n\n\n\n<p class=\"wp-block-paragraph\">If you can master forced appreciation in your area, you will be your only competition. Every property will become a potential investment.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Once you find a promising property to invest in, you need to focus on things that will allow you to increase the value of that property. Smart investors understand how to add value to an asset, creating forced appreciation.<\/p>\n","protected":false},"author":20661,"featured_media":139817,"comment_status":"open","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"footnotes":""},"categories":[7119,5524],"tags":[],"class_list":["post-72385","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-biggerpockets-daily","category-real-estate-investing-for-beginners"],"acf":[],"comment_count":0,"_links":{"self":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/72385","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/users\/20661"}],"replies":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/comments?post=72385"}],"version-history":[{"count":0,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/posts\/72385\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media\/139817"}],"wp:attachment":[{"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/media?parent=72385"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/categories?post=72385"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.biggerpockets.com\/blog\/wp-json\/wp\/v2\/tags?post=72385"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}