Real estate exam terms
2 terms, each with a plain definition, the term it is most often confused with, and how the license exam actually asks about it.
An increase in a property’s value over time
It comes from market forces such as demand, inflation and scarcity, and separately from improvements the owner makes. Measured against what was paid, not against what the property is worth now.
The percentage item is arithmetic with a trap: divide the change by the original figure, not by the new one.
Return expressed as a percentage of the amount invested
Profit divided by what was put in. In real estate the denominator is often the cash actually invested rather than the purchase price, which is what makes leveraged returns look so different from unleveraged ones.
Read carefully for the base the question wants — total price or cash invested. The arithmetic is trivial; identifying the denominator is the item.
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