Price Appreciation 

• Over time, value of real estate can appreciate in value.
• For single family properties / non-commercial real estate, this appreciation can come from increase in demand, decrease in supply, or general inflation.
• Both non-commercial and commercial real estate can benefit forced appreciation.
  • With single family / non-commercial, this is done my updating or renovating the property, and having it more similar to higher value properties. This will lead to new comparables when valuing or appraising the property, leading to higher price per square foot.
  • With commercial properties, forced appreciation can be similar where it is from updating the property, but it needs to translate to higher net operating income (NOI = income - expenses), where value = NOI / cap rate (present value of future income). Therefore, do not need to update the property to increase NOI and increase the value. If you can increase rent or decrease expenses, leading to higher NOI, you can increase the value of the property. if there is higher demand or less supply, or higher inflation, you can increase rent, leading to higher NOI (assuming outpace higher expenses), and increase the value of the property.