Investment property refers to any piece of land which can be used for the purpose of making money. Real estate investment involves the buying, holding, development, possession, rental or sale of property for personal gain. In simple terms, investment property can be termed as any kind of property that can be developed into a productive money-making investment. As part of an overall real estate investment plan, development of such property as a part of an investment property is commonly understood to be part of the wider real estate investment plan known as real property development.
As in the case of investment property, it is not just a matter of acquiring a piece of land and becoming an owner. There are various legal formalities and restrictions involved in buying an investment property and then develop it into a profitable venture. If you have your own little realty, you can choose to use it as a primary home or as a second home or even as a vacation home or rental property. Investment properties come in different shapes and sizes and there are times when you need to consider buying investment property to make a profitable income.
If you intend to buy an investment property to earn money, you must consider all the necessary aspects of it like its location, amenities, capital expenditure, income potential, tax implications and future rent/sale patterns. An important consideration when buying an investment property is the impact it will have on your taxes. Will the IRS allow you to deduct the cost of improvements like building improvements? Will you be able to deduct the cost of repairs to the property if there are substantial repairs to be done?
In addition, you must also assess whether the location of the property will support a commercial enterprise. It would be wise to get a professional’s advice in this regard. The tax implications of purchasing an investment property for the purpose of generating income are quite significant. One of the tax implications that are not that easy to calculate is the effect of inflation on the basis of the purchase price. In other words, how much of your purchase price is actually worth today compared to how much it would cost to rent the investment property at its current rent rate.
The fact is that most investors do not have a very good understanding of inflation and residential real estate markets in general. This is one area where many investors flounder. They are not aware of the ups and downsides of buying realty. Some investors think that investing in residential real estates would fetch them passive income without any effort on their part. Many investors may think that acquiring real estate properties generates income but they do not understand the implications that tax implications have on investment properties.
While commercial property types are many, the most commonly used types are single-family residential, multi-family residential and industrial spaces. Considering the current economic scenario, investing in multiple-unit buildings is not the best option. However, there are various other factors to consider when you are investing in commercial property types like retail spaces, office spaces, industrial lands, etc. If you are interested in investing in multiple-unit buildings, then you need to do some proper research work and find out which type of commercial property would be the best investment option.
The other major consideration when investing in investment properties is the condition of the property. You must check the structural, electrical, plumbing and all important amenities to ensure that your investment properties remain safe. If the property has any serious damages or has been damaged in the past, you should avoid investing in that particular type of investment property. On the other hand, if you choose to invest in primary residence, you should ensure that the location is peaceful and secure and that it has all the basic amenities required by people.
Since there are various investment properties available in the market, there is no dearth of borrowers. There are different types of mortgage products available for primary residence, and you can go in for a mortgaged house, land or a unit. You may prefer to go in for a mortgage product that comes with flexible repayments options to help borrowers make repayment easier. With such options, you will be able to attract more borrowers to buy your investment properties.