Appreciation

Appreciation is the increase in a property's value over time, driven by factors like rising rents, market demand, or improvements to the property itself. It's one of the two main ways real estate investors build wealth, alongside cash flow.

Example

A property with $650,000 in NOI is worth $10,000,000 at a 6.5% cap rate. Raise NOI to $715,000 and, at the same cap rate, the property is worth $11,000,000. A $65,000 increase in income created $1,000,000 in value.