I am looking for a little help on Calculating appreciation rate on a property I purchased. If the Current value is 75k and the original price was 17k, my appreciation would be 58k. Now, if I divide that by the original price to get the rate, I come up with 3.4%. Am I doing this correctly? Please comment.
100x[(Current Value-purchase price) /(Purchase Price)] / years of ownership
That would give you average appreciation per year. So if you bought something for $100k and it's worth $200k after 5 years, the average appreciation is: 100x(200,000-100,000)/100,000/5= 20%/year
EDIT: To answer your question, that property appreciated 341% total. So your math was almost right, just need to multiply by 100 to get %.
@Dustin Beam, thanks alot. I was very confused. So a follow up question just so I'm clear. Is capital improvements always factored into the appreciation? In other words, in my example I purchased a foreclosure so the hike in appreciation is due to me investing nearly 45k in improvements. So how would I expect the property to roughly appreciate by 65% every year?
Or maybe the first year is based upon that number and the following years a new calculation that is based upon the new value?
You should add whatever capital improvements you made to the purchase price and use the same equation as before.
If you can figure out a way to get a property to appreciate 65% every year, please let me in on the secret! :)
Got it, I appreciate the help! And I will definitely keep you posted! lol