What is investment in property's

 

What is investment property in real estate?

Investment property is a piece of land or a building that is bought with the intention of producing a financial return, as opposed to personal use or occupation by the owner. This return can come in the form of rental income or from appreciation, as land and property historically tend to gain value over time.

Investment properties can be residential or non-residential. You might buy property to rent out as studio or office space or storage, or you might purchase a home that can be rented to someone else. If your investment property is a multi-family dwelling, you might even be able to live there and generate rental income at the same time.

Some people invest in property in a less physical way: Rather than buy actual buildings, they invest in financial vehicles like a real estate investment trust (REIT), master limited partnership (MLP) or real estate limited partnership (RELP) that allows them to purchase a share of an income-generating property or properties with other investors. Some of these trade on public stock exchanges; others are found on crowdfunding platforms. While these “passive” real estate investments can bring high returns — and avoid the hassle of building management — they also can be complicated and carry significant risk.

What are types of investment property?

There are different types of properties that can be purchased as an investment. What will work best for you will depend on how you would like to use the property and generate income from it.

Second home

If you already own a home, purchasing a second home offers the opportunity to utilize one of them as an investment property. The home can be rented out or used for a shorter-term dwelling through platforms like Airbnb. The home may also appreciate in value over time and can be sold for a profit later.

Duplexes

Duplexes are common investment properties because they allow the owner to rent out one unit while living in the other, if they choose. Or, both units in a duplex could be rented to generate more income.

Accessory dwelling units

Accessory dwelling units, sometimes called ADUs, are secondary dwellings that exist on the same lot as the primary residence: a basement apartment, detached guesthouse, converted garage, or attached wing with its own entrance. These can be rented out to generate income, though they cannot be sold separately from the main home.

Apartment buildings and multi-family dwellings

Apartment buildings with multiple units that can be rented out often make for good investment properties. In some cases, the owner of the property may live in one of the apartments.

House hacking

House hacking traditionally refers to renting out part of your home in order to generate income. This may mean converting the basement into a rental space or renting out a room in your home to someone else, either for short-term or long-term stays.

Flipping homes

If you have the ability and know-how to buy and fix up a property, house flipping can generate revenue. The process of flipping a home requires buying a property, making improvements to it, and then turning around and “flipping” the property (quickly, within a year or so) by selling it for more money that you put into it. It is faster than waiting for a property to appreciate over time, but carries more risk.

Land

Instead of owning a building, you can choose to buy raw land as investment property. Land is always in demand, eventually, and you might be able to sell a plot that you purchased to someone looking to build, either residential or commercial structures.

Commercial buildings

Residential properties are not the only option for investment properties. You can also invest in commercial buildings, which you can rent out to businesses, for offices, stores or restaurants.

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