Investment Property 101 – What To Look For

investment property

Most people understand that purchasing investment 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.

Second home

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

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.

Accessory dwelling units

Accessory dwelling units, sometimes called ADUs, are secondary dwellings that exist on the same lot as the primary residence: a basement apartment, detached guesthouse, converted garage, or attached wing with its own entrance. These can be rented out to generate income, though they cannot be sold separately from the main home.

Apartment buildings and multi-family dwellings

Apartment buildings with multiple units that can be rented out often make for good investment properties. In some cases, the owner of the property may live in one of the apartments.

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Contact RPM Central Valley

At RPM Central Valley, we specialize in managing rental properties across the Central Valley region.

To learn more about the property management services we can offer you, contact us today by calling (209) 572-2222 or click here.