Most people understand that purchasing property is an investment in their future. Property values tend to increase over time, so if you own a home, it’s likely you will be able to sell that home for a profit later on.
There are ways to maximize property value to create revenue for yourself. Real estate can be an investment. You can buy an investment property to diversify your portfolio, generate streams of income and to make a profit.
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.
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 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.</…….