Property Depreciation
Definition of "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
An insurance policy that promises to pay all the legal obligations of the insured due to negligence in which damage to the property has been caused. ...
Structure that has the same blue print and design as all the other homes in a given development; the opposite of custom built. ...
The rate at which a market can absorb additional units of supply without causing market saturation and severe price distortions. For example, during a recessionary period, many homeowners ...
Right of a property owner located adjacent to an airfield to use the airspace above a certain distance to fly an airplane. However, the owner may not be allowed to put structures, signs or ...
Individual who will receive an inheritance upon the death of another. The proceeds of an insurance policy may be in a lump sum annuity. Real estate also passes to the beneficiary. ...
An insect, such as a termite, that "eats into" the wood and destroys it. This can cause significant damage to the home. Most states have laws that require termite inspection and ...
Final property appraisal estimate arrived at by applying appropriate appraisal methods. ...
Selling price for a property less assumed mortgages by the buyer. For tax purposes, the computation of the contract price is critical. ...
Codes are all around us, determining the logical flow of various events and processes. In the cycle of actions and consequences, codes are used as guidelines. The most commonly known codes ...
Have a question or comment?
We're here to help.