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Investment Property: Part 1


Investment Property: Part 1

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									                     Discover 101 Amazing Real Estate Tips and Secrets

                              Investment Property: Part 1

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Investment Property

What exactly is an investment property? Since this is real estate investments 101, we will
explain. An investment property is a piece of real estate you invest in with the objective of
earning a return. Primary residences are not considered investment properties because the
primary purpose of such real estate is to provide a place to live. Common investment
properties include rental homes, apartments, condos, townhouses as well as commercial
properties such as business or industrial parks and shopping centers.

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Depreciation is a fancy business way of saying something is decreasing in value. Investment
properties may experience depreciation, because typically as a building ages the value of the
physical building depreciates. It is important to note the actual depreciation realized is related
specifically to the value of the physical building. Historically, real estate prices seem to follow a
positive trend. How can this be if old buildings have experienced severe depreciation and thus
are worth less today than 20 years ago? We must look at the whole equation. The value of
the land is integrated into the equation as well, and traditionally land increases in value. Thus,
when we look at investment properties, we normally see an increase in value thanks to the
seemingly continuous appreciation of the land the building was built on.

3. href= Land

A land contract is fairly simple. When you are looking to invest in some property, you will
negotiate a price for the land. The written manifestation of these verbal negotiations is a land
contract. The land contract for the investment property outlines the terms of the agreements,
such as the monthly payments, interest rate, and maturation date of the loan.

4. href= Land

You might have heard other real estate investors talk of a land auction. A land auction is one
way of buying an investment property. In a land auction, land is auctioned off to the highest
bidder. Often times one can score a real deal on property auctioned off in such events. Upon
winning an auction, you can then sign a land contract for the property and hope your
investment property experiences appreciation, rather than depreciation, so that you can cash
in on your increased equity a few years down the road.

5. href= Lien

Before buying an investment property you will want to make sure the property does not have a
lien against it. A lien is basically legalese for a claim against the property. A lienholder owns a

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                     Discover 101 Amazing Real Estate Tips and Secrets

legal right to extract their money from a property should the borrower default. Thus, if you buy
a property that has lien on it, and the person you bought the property has defaulted on their
loan, you may find yourself in second standing for right to the property behind the bank that
has the lien. It is important to do your due diligence and ensure you are not setting yourself up
for a fall by investing in property that can be claimed by others.


Keep in mind that real estate investment can become rather complex. However, if you gain a
good grasp on the fundamentals of investing, such as depreciation, liens, and land contracts
and auctions, you will be in a position to earn a positive return on your investment property for
many years to come.

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