What is Capital Appreciation? | 1 Minute Finance | How to Profit from Real Estate: Part 2

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Transcript:
What is Capital Appreciation?
Capital appreciation is the difference between the selling price and purchase price. If you bought a property for Rs. 60,00,000 and sold it for Rs. 63,60,000, then you have a capital appreciation or gain of Rs. 3,60,000, or 6%. In the housing market, the demand for homes and property market drivers like nearby schools, malls, hospitals, or airports can increase capital appreciation. Inflation, over-supply, and increased borrowing costs can decrease it. Depending on the type of investment and your financial strategy, you may aim for a tradeoff between a property’s rental yield and capital appreciation. If liquidity is not an issue, and your primary goal is to grow your wealth over the long term, then Capital Appreciation will be the most important metric, such that your choice of location, property type, and deal structuring will aim to maximize the growth in property value. To understand the tradeoff between growth in value versus income cash flows, we use ROI or return on investment.