Investment property refers to any land or asset that can be used as collateral for the purpose of raising funds. Real estate investment includes the buying, holding, possession, improvement, lease or sale of property for private gain. Besides real property, investment property also includes mortgages, franchises, interests in rental properties, partnerships and other financial investments.
One of the major advantages of investment property is its potential tax benefits. Potential tax advantages include the reduction of estate and income taxes, capital gains tax (CTC) and mortgage interest. Potential tax implications include the reduction of federal estate tax, the alternative minimum tax (AMT), property depreciation, property levies, personal exemption, state taxes, IRS stamp duty and real property valuation scales. Other tax implications include the local property taxes, sales tax, utility taxes and the federal estate tax. Potential tax implications may also include estate tax, property rental grants, real property taxes and state inheritance taxes. If you are thinking of buying an investment property, you must be aware of these potential tax implications.
Real estate invest in property also offers a good opportunity to build personal equity. Potential equity includes your principal residence, any rental properties owned and any mortgage debt or outstanding payments on such properties. This will generate income for you by way of rental income and mortgage interest. You will have a fixed stream of income that you can use to support your family, retire your dependents or do other things that are profitable to you.
Another advantage of investment property is that it can act as a source of cash flow, especially during economic downturns. During downturns in the market, most borrowers are more interested in paying off their principal loans and mortgage debt than in looking to generate cash from investment properties. During such times, if borrowers are able to keep up with paying their second mortgages and second home equity, they are less likely to default on their mortgages. The net effect is that during an economic downturn, those who own large amounts of mortgage debt and investment properties are less likely to default on their loans and mortgage debts compared to those who do not own such property.
Many potential investors are intimidated by the high cost of buying investment property. In reality, it is possible to obtain rental income from rental properties without having to pay a significant amount of money towards their purchase. In order to achieve this, it is necessary to follow a systematic process that will identify opportunities where you can obtain either free or subsidized housing that has the potential to produce good rental income. Once you have identified such opportunities, you should then contact a qualified real estate agent who has the experience and knowledge to guide you through the process of locating the right type of investment property.
Some people mistakenly believe that purchasing an investment property is only a good option for affluent individuals. However, anyone who is comfortable investing in multiple property portfolios can make money from their investments. For example, a single family homeowner can also make money from rental properties. Alternatively, retirees who own vacation rentals can make money from these properties during their time of year when there is low demand for vacation homes.
Private investors have used investment property to create retirement income by purchasing rental properties that have been foreclosed on. These properties have been resold for a fraction of their cost and investors have been making money from them since. Reactive investors who purchase prime properties at auctions often end up making a substantial profit from these properties.
Real estate investment property offers both short-term and long-term benefits. Those interested in purchasing real estate should consider both types of investment property. The ability to purchase homes for a low cost and the potential to rent them out for a higher price are both attractive reasons for investors to pursue such a venture. Those interested in using real estate as a long-term investment option will find that they have a number of options available.