Q: How does real estate increase in value over time?

A:  I have seen real estate increase in value in three general progressions:

  • Linear Growth: Examples are farmland, residential housing.  Characteristic is already-developed real estate that is in an area with no strong limitations on supply.  The slope of the line is dependent upon the macroeconomic climate of an area.
  • Hockey Stick Growth: Examples are undeveloped land at the edge of a growing town or infill re-development opportunities.  Characteristic is land value is low but “tips” to become more valuable once a city or development catches up to the area.
  • Exponential: Examples are Manhattan and San Francisco real estate.  Characteristic is strong economic climate and limited supply due to geography or regulation.

I haven’t seen any others though they may be out there.

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