What is Future Value?
Future value is a financial concept that refers to the value of an asset at a specific point in the future, given a certain rate of interest or return.
Future value is used to evaluate the potential return on investment and can be calculated using a formula that takes into account the initial investment, the rate of return, and the number of periods (days, months, years, etc.) over which the investment is held.
Why is this term important?
Future value is important in real estate because it helps homebuyers, investors, lenders, real estate agents, and analysts to understand the potential return on investment, make informed decisions about buying or selling a property, and navigate the real estate market.
Here is an example:
If a property is purchased for $1,000,000 and it is estimated that it will appreciate by $500,000 within seven years, then the future value of the property at the seven year mark is $1,500,000.