What Is An Investment Property

Primarily, an investment property is one purchased strictly for the purpose of generating income. It’s neither your current primary residence nor a vacation home used only by your family. An investment property is usually purchased with the intention of either renting it out or renovating it to resell at a profit. There are also some variations on that theme. For instance, when a family relocates or decides to downsize, a primary residence can become an investment property if it doesn’t need to be sold. Another investor may buy a multifamily property, choosing to live in one part while renting out the other. Other owners may choose to use their investment properties once in a while, or part of the year for vacation purposes. Here are some of the benefits: 

·     Double The Profit Potential: An investment property offers two opportunities for financial gain: rent that can provide ongoing income, and appreciation that can result in a sizable profit when the property is sold. There may also be tax advantages available, depending on your financial profile. (Your tax professional can advise you about that.) And it seems that investment properties are a smart place to put your money, outperforming even the stock market. During the two-year period from 2000 through 2002, for example, the median price of second homes rose 26.8%, while the stock market fell.

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       Little Or No Money Down: Unlike the stock market, you can enter the world of property investment with a relatively small amount of out-of-pocket money. Among your financing options, you’ll find loans requiring little or no money down. There are even options that let you use the equity from your current home to purchase your investment property. That leaves your liquid cash assets available for other investment opportunities.

Adding A Home To Your Investment Portfolio

Investors Are Becoming Landlords

     Stocks go up. Stocks go down. Economies ebb and flow. The value of real estate rises and falls. No single investment can promise uninterrupted profit. That’s why savvy investors diversify their holdings. Since real estate — like the stock market — tends to ride out its up and downs well, providing good long-term results, record numbers of people have been buying second properties as investments. Purchases have risen 25% over the last five years to $50 billion and are expected to reach $150 billion by 2005. In fact, forecasters expect Americans to purchase 3.6 million second homes over the next 10 years. That’s about 1,000 a day! While the majority of all second homes are used for recreation, a benchmark study by the

     National Association of Realtors® (NAR) says investment property sales rose from 20% in 1999 to 37% in 2002. And in the first quarter of 2003, for the first time ever, more people bought investment properties than vacation homes. Is it the right time for you to follow this growing and potentially rewarding trend? This guide will help you make the decision. It provides an overview of what to look for in an investment property, the benefits and potential problems of being a landlord, and the choices for financing your investment.

Source:

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