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
Need to know the Ad Litem definition after coming across this weird term? Ad litem is short for “Guardian Ad Litem” or “Attorney Ad litem”, a legal term that ...
Written obligation of a borrower that is backed by collateral in the event of default. The lender must assure himself that the market value of the security equals or exceeds the amount of ...
An individual providing evidence in a trial under penalties of perjury. The witness's testimony id under oath. Observing the occurrence of an event or the transacting of a transaction ...
Floor design to provide sound insulation qualities. A floating floor is separated from the building's structure by use of special resilient materials, often fabricated from fiberglass, or ...
Also called "Grey Shell, "Bare Shell," and "Artic Shell," a Cold Shell could be described as the more radical version of a Vanilla Shell. So, what does precisely the Cold Shell definition ...
A freehold equity in a n estate, restricted to the duration of the life of the grantee or other stipulated individual. ...
In commerce and business, margin as a general term is defined as by the difference between the amount of money spent on a product and the selling price of it. The margin usually appears as ...
The maximum pre-approved amount that an individual or business can borrow without preparing a new credit request. It is a safety buffer in the event funds are needed for unexpected ...
When an Appraisal is done, its ultimate goal is to define a Market Value for that property. So, in short, market value is the value of a real estate property in a free competitive ...
Have a question or comment?
We're here to help.