What is meant by "capital gains" in the context of real estate?

Capital gains in the context of real estate refer to the profits earned from selling a property that has appreciated in value since the time of purchase. When a property is sold for a price higher than the original purchase price, the difference is considered a capital gain. This concept is crucial for real estate investors and homeowners alike as it impacts their overall investment returns and tax implications.

Investing in real estate is often pursued for the potential of property appreciation over time, thus capital gains represent the financial benefit realized when the property is successfully sold. Understanding capital gains also encompasses awareness of factors like market trends, improvements made to the property, and the economic environment, which can influence the extent of appreciation realized.