For all intents and purposes, investment property appreciates in value. If someone asked me the single best reason to own investment property in San Diego I would say APPRECIATION. What is appreciation? Appreciation is the increase of value of property over time due to inflation, supply and demand, capital improvements and other factors. Increase of value adds to your net worth.
What does this mean? It means that if you buy a property for below market value (poor condition, short sale, desperate owner) and you sell it at a future point in time for above market value (nicely upgraded, strong Seller’s market, above average location) than you have just hit the jackpot!
The timing of a property purchase is everything, kind of like the stock market. Holiday time is easier to find a bargain than Spring time. If you find a property on the market in mid-December, you can be assured you have a very motivated owner. (and motivated owners tend to negotiate more).
If you buy low and sell high, you have nothing to gain but money.
Yes, but you may be thinking that you will then have to pay taxes on all that money. Well, yes, you will but you could always do a 1031Tax-Deferred Exchange and roll over the gain tax free……as long as you follow some I.R.S. guidelines.