Home Appreciation Calculator

Home Appreciation Calculator FAQ

What Is Home Appreciation?

Home appreciation is the rate at which a property increases in value over time. Mathematically it is the same as all other forms of appreciation, where the future value of an asset changes over time, based on the interest rate. You can see a full breakdown of the home appreciation formula here.

In favorable market conditions, property prices tend to increase year-on-year, which can lead to significant home equity gains for property investors. However, it is also true that the market will experience downturns, during which your home price may decrease in value. The 2008 Global financial crisis is one such example, and today’s housing market is still affected by the long-term repercussions of this housing market crash.

Ultimately, home appreciation is simply the rate at which your home value increases or decreases over time. It is a fluctuating interest rate which can help you determine what your home price is likely to be in the future, be it over a short term or long-term horizon. When taking a long-term perspective, the average property value in the US tends to increase in value over time, despite inevitable downturns that may occur during certain decades.

Is Home Appreciation Taxable?

This depends on whether or not you sell the property. If you hold the property, the appreciation is not taxed. However, if you sell the property, you are liable for capital gains tax, provided the market value of the property has increased in value over time.

With that being said, there are significant measures in place to reduce the capital gain tax you are liable to pay if you sell your primary residence. To be more specific, you can exclude up to $250,000 in capital gains when you sell your house. This can be extended to $500,000 if you file a joint tax return with your spouse.

Furthermore, you are also able to offset the amount of tax you pay with rental property specifically, if you exercise your right to deduct depreciation as an expense. This can have a big impact on the cash flow and profitability of a real estate investment property, by reducing the amount of taxable income that you are liable to pay the IRS.

With that being said, if you sell a rental property, the tax implications are a bit more complex, because you need to factor in the capital gains tax and property depreciation and your personal tax rate to work out the final amount that you need to pay. If this applies to you, it would be best to research this topic further or consult a professional tax advisor to ensure you file your tax return correctly.

What Is A Good Home Appreciation Rate?

This is a subjective question that will depend on the individual real estate investor. Generally speaking, the higher the appreciation rate the better.

 

In America, home appreciation rates have range from 2-6% when looking at the real estate market over a period of 10 years or longer. As mentioned earlier, the global financial crises caused the real estate bubble to crash, but the market has recovered very well since then.

 

Ultimately, you could say that 2% and above is a respectable annual appreciation rate, and that the higher the number, the better it is for the property investor.

How Do Your Workout Home Appreciation In Your Area?

There are few ways to work out the real estate appreciation rate in your area.

The first option is to simply research appreciation rates in your particular suburb online, while being vigilant about the information resources you consult during the research process.

The next option is to consult popular listing websites like Zillow, NeighborhoodScout , and Trulia . Each of these websites can help you determine the home appreciation rates in your area.

The third option is to view the last known sale price of similar properties in the area with New Silver’s ARV Calculator. This is an easy and free way to workout housing prices based on sales history.

Lastly, consulting a reputable realtor or real estate agent in your area is also a good option. A realtor can help assess the fair market value of your property in its current condition, and provide a reliable estimate of the annual appreciate rate in your suburb.

Estimated Home Value vs Appraised Value

When estimating home value, the appraised value is generally the most accurate estimate that you are likely to find. This is because professional appraisers will review the last known purchase price of all the best comps (similar properties) in the area, when calculating the property’s value.

By assessing the last known sales price of each comparable property in the area and completing a comparative market analysis, an appraiser can determine a very accurate estimate of how much a property will actually sell for in current market conditions.

Additional Real Estate Calculators & Resources

Rental Property Calculator: Workout the potential profitability of an investment property with our Rental Property Calculator.

Hard Money Calculator: To figure out the ROI of a fix and flip, you need a comprehensive Hard Money Calculator. It allows you to workout the monthly repayments, analyze net operating income, calculate the return on investment when you sell the property.

BRRRR Calculator: Each step in the Buy, Rehab, Rent, Refinance, Repeat (BRRRR) requires detailed analysis before you proceed with the deal. Fortunately our BRRRR Calculator breaks the process down into simple phases that are pretty easy to understand.

ARV Calculator: Quickly assess the After-Repair Value of a property with our user friendly ARV Calculator.

Cap Rate Calculator: Cap Rate is a simple formula that helps investors work out how profitable an investment property is likely to be. Our Capitalization Rate Calculator makes this easy to do, in very little time.

FlipScout: FlipScout is a free search engine for property flippers. It lets you find properties that you can earn the highest return on when completing a fix and flip or fix-to-rent project. You can learn more about FlipScout here.