What Is an Investment Property?

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Small older house in Hollywoood Lakes neighborhoood in Hollywood, FL

An investment property is purchased with the purpose of gaining a return on investment. It can be any type of real estate, be it a vacant land, an apartment building, a duplex, a single-family home, commercial property. Usually, the property is NOT occupied by the property owner. But sometimes investor buys a few units appartemnt building, live in one apartment and rent the rest. It could be a duplex, when the owner lives in one unit and rents the other unit to a renter.

How Is Profit Generated?

Profits are generated through rental income and/or capital gains.

Property investing involves buying, owning, renting, managing,  and/or selling of real estate for profit.

This type of property is purchased with the goal of  an income by renting the property, buying low and selling high, profiting over time from appreciation, renovating and fixing the property selling it for more than the purchase price.

Improvement of real estate as part of an investment game plan is generally considered to be a sub-specialty of real estate investing called real estate development.

 

Liquidity and Cash Flow

Real estate is an asset with limited liquidity when comparing to other investments.  It is not like cash in the savings acount, not like stocks or shares, when the owner can get cash withdrawal from the saving, or sell the stock and get the money fast. Real estate owner can’t get cash fast, unless sells real estate at discount.

Real estate depends on cash flow. It needs a lot of capital up front , but this capital can be gained with a mortgage. the owner borrows money.

This where the saying is “Make money with others’ people money