Which term best describes the ability of investment property to lose value?

The term that best describes the ability of investment property to lose value is depreciation. Depreciation is an accounting method used to allocate the cost of a tangible asset over its useful life, reflecting a reduction in the value of the property as it ages or due to wear and tear. In real estate, depreciation can occur due to various factors, such as changes in the market, deterioration of the property, or changes in the neighborhood.

Understanding depreciation is important for investors as it affects their financial calculations, including tax deductions and overall investment returns. It is a crucial concept in real estate investment as it helps in assessing the long-term viability and profitability of property holdings.

Appreciation, on the other hand, refers to the increase in property value over time, which is the opposite of what depreciation signifies. Valuation is the process of determining the current worth of an asset, and capital gains refer to the profits made from the sale of an asset when it has increased in value; both of these terms do not specifically address the concept of losing value.