Investment Property
Definition and meaning of Investment Property in real estate.
An investment property is real estate purchased with the primary intention of generating income or profit, rather than serving as the owner's primary residence.
In more detail
These properties generate returns through rental income, future resale value appreciation, or both. Investors can purchase residential properties like single-family homes or apartment buildings, or commercial properties like office spaces and retail centers. Financing for investment properties typically requires larger down payments, higher interest rates, and stricter credit qualifications than primary residence loans.
Additionally, tax rules for investment properties are unique, allowing deductions for expenses like depreciation and repairs, while also subjecting profits to capital gains taxes.
Key facts
| Category | Real Estate Investing |
|---|---|
| Types | Residential rentals, commercial spaces, and fix-and-flip projects |
| Financing requirement | Typically twenty to twenty-five percent down payment |
| Tax benefits | Depreciation write-offs, expense deductions, and 1031 exchanges |
An investor purchases a duplex, living in neither unit and instead renting both sides out to tenants to earn monthly rental income and build long-term equity.
Frequently asked questions
Can you get a standard residential mortgage for an investment property?
You cannot use standard owner-occupied mortgage programs, but you can get investment property loans, which have higher interest rates and down payment requirements.
What is a 1031 exchange for investment properties?
A 1031 exchange is a tax-deferred transaction that allows real estate investors to sell a property and reinvest the proceeds into a new property of equal or greater value, deferring capital gains taxes.
Related terms
Sources & references
See our sources and editorial standards.