Investment Property
The investment property definition is pretty simple: it is a property which its main purpose is not sheltering/housing its homeowner but acting as an investment asset.
The ways an investment property can bring return to investors are either instantly through rental income or over time, when the homeowner sits on the property until the value appreciation of the area is good enough for him (or her) to sell it, making money off of the interest appreciation – bought a house at $200,000, sold for $500,000 profiting $300,000 off of that investment. It can be both too: someone that, while waiting for the house to appreciate its value, rents the investment property to make money. Or even a rent with option to buy property.
However, the investment property definition can get murky when you buy second homes. Say you are a snowbird from Boston that buys a home in Florida to run away from the winter. While the rest of the year you use the southern home for airbnb renting, making money off of it like an investment property, you do live in the place for about 4 months a year. Does that make the house an investment property or not? And does it even matter what name is it called?
Actually, yes.
Investment properties, for instance, can’t benefit off a mortgage insurance, as insurance companies only provide a mortgage to primary residences. And that includes Federal Housing Administration (FHA) loans. Not to mention tax exemptions a vacation home cannot bring.
So there are a bunch of factors that determine if a home is an investment property or not – like the distance between the primary residence to the second home and even just to name one. It will depend on the loan originator and the story you tell them.
Real Estate Advice:
Have a chat with your real estate agent and a financial advisor so you don’t learn down the road that your money is going down the drain and you could be profiting much more.
Popular Real Estate Terms
Home designs developed after World War II incorporating modern technology, materials, and architecture including energy conservation methods to achieve a highly functional structure. ...
People can use the term disclosure in ordinary day to day activities. The definition of disclosure is to expose yourself, to show the truth without omitting any important information. ...
Rooflike cover that extends over any place to provide shelter from the sun, rain, or wind. ...
Generally, the escalation clause, often known as the escalator clause, means a provision in a contract enabling an upsurge in prices, bids, or wages. You must understand that they come into ...
Everyone knows what is a retirement home, but if we were to give our best most concise retirement home definition it would be of something like: real estate facilities that cater to retired ...
Value of a company's or person's name and reputation, As a result, the business will have a competitive edge, and generate better-than-typical future earnings. ...
Condition that affects the probability of losses or perils occurring. An example is possible earthquake or flood damage to a house. ...
Each payment made by the borrower is equal each period, usually monthly. Each payment is comprised of principal and interest. Interest is based on the beginning balance. The cash paid less ...
(1) Distribution channel through which originating mortgage lenders distribute mortgages to the Secondary Mortgage Market. Those purchasing mortgages distributed through the conduit ...
Have a question or comment?
We're here to help.