But don't run to the bank dumb and happy. Your evaluation of your investment success will be more accurate and you'll judge all future purchases more profitably if you can distinguish between the effects of inflation and appreciation on the value of your property. More about appreciation next. Appreciating Appreciation Let's look at how appreciation is often confused with inflation. The property owner may feel that his investment is making money but, in fact, it has just stayed even in terms of real worth.
Appreciation is the goal of every investor who buys and sells real estate.
For example, the knowledge that a large corporation will soon be locating its national headquarters in a certain town will affect the area's economics and demographics and would indicate a probable appreciation in the value of land. Real estate is the only investment vehicle with this kind of special subsidy. Income from the ideal rental property will pay all the expenses of the property and hand over a little extra cash for the investor to spend. At the same time, it will chug right along acting as a hedge against inflation and appreciating, too. There's more about cash flow and how it figures in picking a good deal in Chapter 4.