Property Depreciation
To depreciate is to lose value for something. Depreciation is the act of losing worth.
Connecting with real estate, Property depreciation can be both an accounting method typically used to assess the decrease of value of something stretched over time in order to reduce taxable income without reducing cash, or the simple fact of an asset losing its value due to time and usage.
Was that vague? Well, then let’s go deep and get metaphysical here: only change is constant in life. That means that everything is changing from moment to moment. Could you say that a car you bought for $100,000 10 years ago, a vehicle that stayed days and days in direct sunlight, endured rain, a few bumps, plus extensive family use and a lot of miles of usage … is still worth $100,000?
Of course not.
That’s why you see a lot of collectors that do not take toys out of their box. It’s a way to conserve value; the moment the toy is out of the box, the moment the car is out of the dealership, the moment the house gets build… the property depreciation clock starts to run. To some extent, maintenance may partially arrest or offset wear and deterioration but - because defining “value” requires a comprehensive approach - technical obsolescence of its materials and technology might also come into play.
In the end, property depreciation and depreciation as a whole is the culmination of the understanding that the more you use things, the more they lose their worth. In a capitalist society where productivity is everything, it might be a harsh concept, but a very necessary one. Now - since not all things are worth the same and some things take its toll earlier (or later) than others – property depreciation is to be read as more of a concept or convention, than a pragmatic universal calculation. Property depreciation needs to be calculated considering a lot of factors. In real estate and elsewhere. But the main idea is thinking about the asset’s usage lifespan and calculating its curve of value throughout it.
Real Estate Tip:
Is property depreciation common? Yes! And the longer you try to sell your house without a real estate agent the bigger the property depreciation of your property becomes! Time is money! Don't wait to find out the hard way what happens when a property starts to depreciate! Search The OFFICIAL Real Estate Agent Directory ® find a local real estate agent and get that money!
Popular Real Estate Terms
In commerce and business, margin as a general term is defined as by the difference between the amount of money spent on a product and the selling price of it. The margin usually appears as ...
The clear, open and active occupancy of real estate. For example, notorious possession is one of the tests for adverse possession. ...
The definition of abatement is a reduction of penalties or a tax deduction for individuals or businesses. It can often be accessed upon an overpayment of taxes, if the company or individual ...
How many days, months, or years are required before a new building has the desired occupancy ratio. The occupancy rate influences the amount financial institutions are willing to lend. ...
The Ellwood method based on a multiplier of mortgage-equity to determine the value of income-producing property. ...
The total destruction, razing, tearing down, breaking into pieces or pulverizing of a structure on a building site. Demolition usually occurs when clearing a building site either as ...
A form of life or disability insurance where a mortgagor insures a mortgage in the event of death or disability. The principal covered by mortgage insurance declines as the mortgage is ...
(1) Subunit integral to a larger unit. (Usually associated with furniture). (2) Permanent fixture or appliance which is not intended to be portable and cannot easily be removed. A home has ...
Borrower's right to redeem his property by immediately paying off the loan balance and any related costs. ...
Have a question or comment?
We're here to help.