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Investment property is any real estate purchased with the intention of earning a return, such as renting, appreciation, or selling at a profit. One strategy is to live in one unit of a multi-family property while renting out the other. Equity can be used to finance the purchase of additional investment properties. Tax sales can also offer opportunities for investment.
Any property that is purchased with the intention of earning a return is considered investment property. It can be an apartment building, a duplex, a single-family home, vacant land, commercial properties, basically any type of real estate. This type of property is purchased with the sole intention of earning an income, either by renting the property, taking advantage of appreciation over time, buying low and selling high, or renovating the property and selling it for more than the purchase price. . Although most investment property owners do not live there, in some cases, the owner may occupy a portion of the property.
Buying investment property can be a lucrative venture, whether one simply wants to buy a home or plans to make a business out of such investments. One strategy for beginners is to buy a property such as a duplex or other multi-family home, and live in one unit while renting out the other. In this way, the money collected from the lessee or lessees covers the note, leaving the owner without a mortgage payment. Eventually, the property is paid for and the buyer continues to collect rent to make a profit.
The owner may also purchase another investment property, using the equity from the first property to finance the purchase. Equity simply means the fair market value of the property less the amount owed, including liens. It is common to borrow against the equity of a property. The rates for such loans are quite competitive because the property acts as collateral to secure the loan. The less risk there is in the loans, the better the rates.
Sometimes an investment property is purchased at a tax sale. When the original owner does not pay property taxes for a certain period of time, the property can be put up for auction. An investor starts with a minimum offer, one that is high enough to cover back taxes and expenses from the sale, but still allows you to purchase the property for minimal cost. Such a purchase is an investment property because the new owner will likely try to resell it at market value, fix it up and sell it at a premium, or use it as a rental.
Smart Asset.
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