# How to Calculate Appreciation on Rental Properties

Appreciation

 Organic Appreciation \$7,834 + Forced Appreciation + \$0 Total Appreciation = \$7,834

Let's walk through calculating Appreciation for Typical 25% Down Payment Gainesville, Florida Rental Property.

First, there's organic appreciation and forced appreciation.

Organic Appreciation

Organic appreciation is the tendency that properties become more expensive over time. Some would argue that, at least part of it, is from inflation.

Ultimately, to calculate the organic appreciation we will need the current value of the property and Appreciation Rate.

Both the current value of a property and the appreciation rate are easy since they both are primary inputs that do not require any real calculation.

Organic Appreciation

 Property Value \$261,142 × Appreciation Rate × 3% Appreciation = \$7,834

That means that we're estimating Typical 25% Down Payment Gainesville, Florida Rental Property will naturally and organically appreciate \$7,834.26 over a full year.

Forced Appreciation

Forced appreciation from buying a property at a discount and/or improving the property to add value.

To calculate forced appreciation—especially on a new purchase—we will take the difference between the Purchase Price and the After Repair Value of the property.

Forced Appreciation

 After Repair Value \$261,142 - Purchase Price - \$261,142 Forced Appreciation = \$0

That means that we're estimating Typical 25% Down Payment Gainesville, Florida Rental Property was forced to appreciate \$0 by buying at a discount and/or improving the property in the next year.

It is not uncommon to have zero or even negative forced appreciation on a property when acquiring it. In fact, sometimes we deliberately trade the short-term benefit of buying a property at a discount to select a property that is likely to see better than average organic appreciation in the long-term. Think of this as: selecting a high quality, in-demand property that is likely to continue to increase in demand in the future and grow faster than inflation and other properties in different areas or with different characteristics.

Total Appreciation

The total appreciation is the sum of the estimated organic appreciation and the estimated forced appreciation over the next year.

Total Appreciation

 Organic Appreciation \$7,834 + Forced Appreciation + \$0 Total Appreciation = \$7,834

For Typical 25% Down Payment Gainesville, Florida Rental Property we're estimating the organic appreciation of \$7,834.26 plus the forced appreciation of \$0 gives us an estimated total appreciation of \$7,834.26 in the next year.