The word, depreciation, is used in several ways. Many people,
especially investors, primarily think of the tax ramifications/ write -
offs, related to depreciation. However, this article will discuss how
houses depreciate, in a more general manner, differentiating between
factors such as neglect, and day - to - day normal deterioration, etc,
how changing times/ needs impact home value, and how external factors
might have a significant impact. The first two considerations occur
within the property, while the last is external. Internal considerations
are often addressed by repairs and renovations, while external factors
are often only addressed by price adjustments, etc.
1. Physical deterioration: Every house changes, in some ways, through usage, weather conditions, wear- and - tear, and perhaps, neglect! This includes maintenance of the grounds/ property, such as gardens, lawns, trees, etc, as well as driveways, garages, walkways, etc. It also includes factors requiring repair, such as cracked windows, peeling paint (inside and outside the house), leaks (air and/ or water), lingering odors, walls requiring patching or repair, etc. Some of these are minor, in nature, while others might require considerably more time, effort and/ or expense.
2. Structurally obsolete: Times change, housing styles change, and thus, some older homes possess certain obsolete and/ or dated features and/ or details. Can you identify areas in a house which might fall into this category? One area is hallways and entry - ways, where an older house may have extremely narrow ones, which are often undesirable today. Another is a bathroom, either the number, location, or layout/ decor. For example, how many bathrooms are there? Where are they? Are they where people, today, prefer? How about their size? Have they been modernized and upgraded? We've all seen houses with old - fashioned bathrooms, including the style of tile on walls and floors, etc. Look closely at the kitchen, both in terms of size and layout, as well as appliances, and appearance. Today, the vast majority of home buyers seek counter - tops, made of granite, or one of the granite - substitute substances, such as Coriander. Most do not want the wood or formica materials, many older houses possess. Would the house meet today's Building Code, which would become a factor, if, and when, someone might decide to make certain changes (especially structural ones).
3. Economic obsolescence: Has the area changed, for the worse, over the years? What changes might make an area less desirable? Some of these include: increasing crime rate; weakening schools; loss of a major employer in the area; factors which often decrease interest, such as airport noise/ proximity, changing road configurations, access, safety, etc.
Of these three, obviously the first type is easiest to correct. The second type is often correctable, but the bottom line sometimes becomes, is it worth it? The third type, which is external, will simply negatively impact the value of a house!
1. Physical deterioration: Every house changes, in some ways, through usage, weather conditions, wear- and - tear, and perhaps, neglect! This includes maintenance of the grounds/ property, such as gardens, lawns, trees, etc, as well as driveways, garages, walkways, etc. It also includes factors requiring repair, such as cracked windows, peeling paint (inside and outside the house), leaks (air and/ or water), lingering odors, walls requiring patching or repair, etc. Some of these are minor, in nature, while others might require considerably more time, effort and/ or expense.
2. Structurally obsolete: Times change, housing styles change, and thus, some older homes possess certain obsolete and/ or dated features and/ or details. Can you identify areas in a house which might fall into this category? One area is hallways and entry - ways, where an older house may have extremely narrow ones, which are often undesirable today. Another is a bathroom, either the number, location, or layout/ decor. For example, how many bathrooms are there? Where are they? Are they where people, today, prefer? How about their size? Have they been modernized and upgraded? We've all seen houses with old - fashioned bathrooms, including the style of tile on walls and floors, etc. Look closely at the kitchen, both in terms of size and layout, as well as appliances, and appearance. Today, the vast majority of home buyers seek counter - tops, made of granite, or one of the granite - substitute substances, such as Coriander. Most do not want the wood or formica materials, many older houses possess. Would the house meet today's Building Code, which would become a factor, if, and when, someone might decide to make certain changes (especially structural ones).
3. Economic obsolescence: Has the area changed, for the worse, over the years? What changes might make an area less desirable? Some of these include: increasing crime rate; weakening schools; loss of a major employer in the area; factors which often decrease interest, such as airport noise/ proximity, changing road configurations, access, safety, etc.
Of these three, obviously the first type is easiest to correct. The second type is often correctable, but the bottom line sometimes becomes, is it worth it? The third type, which is external, will simply negatively impact the value of a house!
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