An investment property is one that you acquire with the intent of making a profit off of it, whether that’s through reselling it in the future, rental income, or both. A rental property may be owned by an individual or a group of investors, and investing into a rental property can be both for the long or short term.
One popular way of profiting off of an investment property is by flipping it. House flipping is where a property is purchased, remodeled, upgraded, and then sold for profit in a short period of time.
Investment property is a broad term and can be used to describe many different types of properties. This can include houses, land, and commercial buildings.
Most Common Forms Of Investment Properties
- Residential Properties: Since rental properties are one of the most common ways to supplement income, people often buy a property that they can rent out and collect rent from every month. There are several examples of rental properties, including trailers, single-family homes, condos, town-homes, and multi-unit properties.
- Commercial Properties: While residential properties are the most common types of properties, commercial ones typically generate bigger returns. Commercial properties are usually purchased by a group of investors or a corporation. These are often used for business purposes only. Although these buildings typically have bigger returns, they also have higher maintenance expenses. Some examples of commercial properties are retail store locations, shopping strips, or commercially owned apartment complexes.
- Multipurpose Properties: Multipurpose properties are becoming more and more popular as they can be used for both commercial and residential purposes. An example of this is a building that has a store, restaurant, or bar on the first floor and multi-unit housing on the second floor.
5 Reasons You Should Live In An Investment Property
1. Provides Supplemental Income
Making money is the main reason most people decide to rent out their property or part of it. The amount they can make from rent may be reliable, though most people who live in their investment property usually pay very little in mortgage and can even live for free. The income you make from living in your investment property can be used to pay off your mortgage, make life purchases, or buy everyday necessities.
2. Helps You Qualify For Tax Cuts You Normally Wouldn’t Qualify For
When you live in your investment property, everyone wins. The government is known to compensate and give tax cuts to people who offer housing to paying guests. This is because of the high costs of housing, which leads to a shortage of affordable housing. Rules and tax laws vary depending on your local authorities, so be sure to always check your local laws before renting out part of your home.
3. Much Simpler When It Comes To Regulations
Living in your investment property can make things much simpler and easier when it comes to the legal obligations that come with being a traditional landlord. One example of this is if you rent out a room in your house, you don’t need to sign a legal agreement, although it’s recommended. This agreement includes your renter's rights, responsibilities, rent amount, length of the lease, along with the agreed upon move in and move out dates.
4. Provides Company
Living in your own home can get lonely if you live by yourself. However, if you live in your investment property, your renters' company might bring you a sense of security, especially in the evenings and nights. Also, if you have a two-person job around the house, your renter might be willing to help you in return for reduced rent.
5. Can Help Make Qualifying For Loans Easier
As with any loan, getting one for an investment property can be challenging. When you live in your investment property, it can help you qualify for better loans with lower interest. This is because owner-occupant loans have some of the lowest down payments, some even as low as 0%. Moreover, living in your investment property gives you access to loans from the Federal Housing Administration, the US Department of Veterans Affairs, and Fannie Mae and Freddie Mac.
Acquiring a rental property doesn’t have to be as hard as it seems, though finding the money for an investment property can be a challenge for some. However, this can become a worthy endeavor since living in your investment property can allow you to qualify for loans with 0% down payment. Moreover, the rental income can help offset mortgage payments or even completely pay off your mortgage. You can also enjoy some tax cuts and simpler regulations, not to mention the company of your renters if you live in your investment property.