All appreciation is NOT the same. And it’s not all equal, despite the way everyone from the experts to the financial news guys throw around the term. The truth is, when it comes to real estate, there are two types of appreciation: Forced and Automatic
What Is Forced Appreciation
Forced appreciation is what we, as "traditional" real estate investors, were taught to focus on. Buy low and (hopefully) sell higher. Forced Appreciation investors only make money on the "spread" – the difference between what you’ve got in it, and what you get out of it – after ALL expenses are paid.
With Forced Appreciation your upside profit is limited. It’s transactional INCOME.
Forced appreciation is where you build an acquisitions funnel to find motivated or un-informed sellers. You cast a wide net, filter potential deals and try to buy properties below market. Once you have them tied up or purchased, you try to add value through things like rehabbing and marketing.
You "force" the appreciation and profits through your hard work and special skills. It’s what most real estate investing books and guru home study courses have been teaching for the last 30 years -- tactics like pre-foreclosures, wholesaling, subject-to's, probate, tax deeds, rehabbing and more.
There’s nothing wrong or hard about buying properties below market; it just takes time and money. It’s a job. You stop doing it, your income stops as well. It’s transactional income, not wealth building.