Investment Property

AAA

DEFINITION of 'Investment Property'

A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property, or both. An investment property can be a long-term endeavor, such as an apartment building, or an intended short-term investment in the case of flipping (where a property is bought, remodeled or renovated, and sold at a profit).

INVESTOPEDIA EXPLAINS 'Investment Property'

An investment property is like any other investment: the goal is to generate a profit. In real estate, this is achieved through income (rent, for example) or through a profitable resale. The way in which a property is used has a significant impact on its value. Investors sometimes conduct studies to determine the best - and most profitable - use of a property. This is often referred to as its highest and best use. Certain properties can be developed in more than one way (commercially zoned property, for example) and investors can maximize returns by determining the highest and best use.


RELATED TERMS
  1. Real Estate

    Land plus anything on it, including buildings and natural resources.
  2. Alligator Property

    In real estate, when the cost of mortgage payments, property ...
  3. Cash Flow

    1. A revenue or expense stream that changes a cash account over ...
  4. Commercial Real Estate

    Property that is used solely for business purposes. Examples ...
  5. Investment Real Estate

    Real estate that generates income or is otherwise intended for ...
  6. Hedge Fund

    An aggressively managed portfolio of investments that uses leveraged, ...
RELATED FAQS
  1. Why should you invest in tangible assets?

    Savers who deliberately buy tangible assets for investment purposes value their tangible goods as a form of value diversification ... Read Full Answer >>
  2. How much of the asset management industry has moved from traditional managers to ...

    While the exact numbers are difficult to calculate due to variations in measurement and the overall growth of the asset management ... Read Full Answer >>
  3. What role did securitization play in the U.S. subprime mortgage crisis?

    The securitization of subprime mortgages into mortgage-backed securities (MBS) and collateralized debt obligations (CDOs) ... Read Full Answer >>
  4. Which asset classes are the most risky?

    Equities is the riskiest class of assets. Dividends aside, they offer no guarantees, and investors' money is subject to the ... Read Full Answer >>
  5. How do I purchase shares of a closed-end investment?

    Unlike open-end mutual funds that sell shares in the fund directly to investors, closed-end funds are traded on an exchange ... Read Full Answer >>
  6. How can you use a debt service coverage ratio (DSCR) to evaluate real estate investments?

    Historically, real estate has been an attractive way to achieve portfolio diversification for a wide range of investors due ... Read Full Answer >>
Related Articles
  1. Active Trading

    FYI On ROI: A Guide To Calculating Return On Investment

    Return on investment is a simple equation that can give you an edge when fine-tuning your portfolio - here's how to use it.
  2. Home & Auto

    How To Value A Real Estate Investment Property

    Make sure you know what your real estate investment is worth before you sign the ownership papers.
  3. Active Trading

    Trade Properties To Keep The Taxman At Bay

    Like-kind exchanges can mean a much lower tax bill on real estate for savvy investors.
  4. Taxes

    Avoid Capital Gains Tax On Your Home Sale

    If you have property to sell and want to avoid capital gains tax, a Section 1031 exchange may be the answer.
  5. Home & Auto

    Real Estate Vs. Stocks: Which One's Right For You?

    There are ups and downs for both real estate and stock investments, so before diving in, know the differences between the two.
  6. Options & Futures

    Rent To Own; Own To Rent

    This method can help first-time buyers afford a home using a rent-to-own strategy, and it can also be good for investors.
  7. Forex Education

    Countries Where Bitcoin Is Legal & Illegal

    Although bitcoin has been in existence for five years, most countries still do not have consistent laws regulating the cryptocurrency. However, a few countries have banned bitcoin altogether.
  8. Stock Analysis

    Fight Volatility and Inflation with Infrastructure

    As institutional investors flock to infrastructure assets there's good reason for retail investors to follow suit.
  9. Investing

    The 10 Biggest REITs in the U.S.: Dos and Don'ts

    Five of these REITs may offer potential over the next 1-3 years. Be careful with the other half.
  10. Savings

    How to Invest in Liquor (and Avoiding the Hiccups)

    Investing in liquor has been profitable for ages but there could be some hiccups along the way.

You May Also Like

Hot Definitions
  1. Merger Arbitrage

    A hedge fund strategy in which the stocks of two merging companies are simultaneously bought and sold to create a riskless ...
  2. Market Failure

    An economic term that encompasses a situation where, in any given market, the quantity of a product demanded by consumers ...
  3. Unsystematic Risk

    Company or industry specific risk that is inherent in each investment. The amount of unsystematic risk can be reduced through ...
  4. Security Market Line - SML

    A line that graphs the systematic, or market, risk versus return of the whole market at a certain time and shows all risky ...
  5. Tangible Net Worth

    A measure of the physical worth of a company, which does not include any value derived from intangible assets such as copyrights, ...
  6. Marginal Utility

    The additional satisfaction a consumer gains from consuming one more unit of a good or service. Marginal utility is an important ...
Trading Center