What Is An Investment Property?

One question that I get pretty often when discussing real estate is “what do you mean by ‘investment property’”? Quite simply put, an investment property is real estate that generates income. In theory, any property could become an investment property and anyone could be an investor. Forbes estimates that 10% of the world's richest people made their money in real estate, and that it’s the third most common industry to build billionaires. Below, I’ll explain the two main ways to generate a profit from property:

1. Rental income

This may be one of the most common ways in which people anticipate investment from a property. Living in one property and renting the other out, or even multiple properties, is a relatively quick way to start generating a return on your initial purchase costs. However, you should consider ongoing maintenance costs and the risks that come with having tenants in your property such as incorrect internal maintenance or wear-and-tear during their tenancy.

2. Resale

While rental income provides a generally stable return on your investment over a prolonged period of time, selling the property can provide a huge injection of cash. 

Overtime, property values tend to appreciate. For example, a vacant lot bought in 1995 may have been purchased for $45,000 and sold for $180,000 in the 2020s. That means the owners would’ve earned $135,000 from that sale by simply sitting on it for 25 years. 

Another way to boost your resale value is of course through renovations. You can update your family home to prepare it to hit the market, or you can buy a fixer upper, build up your equity in it then sell it for a much higher price than you purchased it for. “Home flipping” is a huge industry generating impressive returns. 

For the more risk averse like myself, a pretty stable way to ensure returns on your property are to rent it out at first for a while then sell later down the line to give you a large cushion of cash. Ready to start getting investment returns on your own property? Get in touch with me today and and let’s get started.