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Intermediate45 minutes8 terms

Functional Obsolescence: Key Terms

This curated collection offers key terms that might be helpful when exploring functional obsolescence in real estate investment. It's designed as a quick reference to understand commonly referenced concepts and their impact on property valuation and investment decisions.

Term Collection

1

Rehabilitation

Real estate rehabilitation is the process of extensively repairing and upgrading a distressed property to restore it to an improved condition, significantly increasing its value and functionality for sale or rent.

Intermediate13-14 min
2

Depreciation

Depreciation in real estate is an income tax deduction allowing investors to recover the cost of an income-producing property over its useful life, excluding land value, thereby reducing taxable income.

Intermediate13-14 min
3

Value-Add Strategy

A real estate investment strategy focused on acquiring underperforming properties and increasing their value through renovations, operational improvements, or repositioning to boost Net Operating Income (NOI).

Intermediate15-18 min
4

Economic Obsolescence

Economic obsolescence refers to a loss in property value due to external factors unrelated to the property itself, such as changes in market conditions, economic downturns, or shifts in local demographics. It is typically considered incurable by the property owner.

Intermediate5 min
5

Appraisal

An appraisal is an unbiased, professional opinion of a property's market value, conducted by a licensed appraiser, primarily used for lending, buying, and selling decisions.

Intermediate14-15 min
6

Cost to Cure

Cost to Cure is the estimated expense required to repair, replace, or restore a property to its intended condition, or to remedy identified defects, crucial for real estate investment analysis.

Intermediate5 min
7

Highest and Best Use

Highest and Best Use refers to the reasonably probable and legal use of a property that is physically possible, financially feasible, and results in the highest value, guiding optimal property utilization and investment decisions.

Intermediate13-14 min
8

Functional Obsolescence

Functional obsolescence refers to the loss in property value due to an outdated design, inadequate utility, or undesirable features that no longer meet current market standards or buyer preferences. It can be curable or incurable, significantly impacting a property's marketability and investment potential.

Intermediate13-16 min

Common Questions