Appreciated property refers to a property that has increased in value over time. This increase could be due to a variety of factors, such as improvements made to the property, a general rise in market prices, or increased demand in the area.
For example, if an investor purchases a building for $1 million, and after a few years the market value of that building increases to $1.5 million, the building would be considered an appreciated property.
The concept is particularly important in real estate because the value of appreciated property can significantly affect investment returns, and is a major component of wealth creation through real estate. It’s also important for tax purposes, as selling appreciated property may result in capital gains tax, but there are strategies like the 1031 exchange in the United States that can defer this tax.