Physical Depreciation
Physical depreciation is the loss in a property's value due to wear, tear, and deterioration from use, weather, and age. This type of depreciation affects the building's components, systems, and overall condition, reducing the property's market value over time.
Example
“The 20-year-old roof showed significant physical depreciation that reduced the property's market value by $15,000.”
Memory Tip
Think 'physically getting cheaper' - as things physically wear out, they become cheaper/less valuable.
Why It Matters
Understanding physical depreciation helps property owners budget for maintenance and improvements while helping investors evaluate potential returns and renovation costs.
Common Misconception
Property owners often think physical depreciation is inevitable and irreversible, but proper maintenance and strategic improvements can slow or even reverse depreciation effects.
In Practice
An appraiser evaluating a 20-year-old home notes physical depreciation in the aging roof, outdated HVAC system, and worn flooring, reducing the property's value by $30,000 compared to a similar new home.
Etymology
Combines 'physical' from Greek 'physikos' (natural) and 'depreciation' from Latin 'depretiare' (to lower the price), literally meaning naturally decreasing value.
Common Misspellings
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