Real Estate Investing Information » Investment Property or Income Property?

Investment Property or Income Property?

The tactic behind investing in an income property is paying attention around making money now. Not everybody can invest funds in real estate and expect for a huge return 15 or 20 years down the road. For investors that don’t have a big stash of cash laying about waiting 15 or 20 years meant for a return on their investment is not a viable business plan. Thus, as you might look forward to, an income property is a property that gives positive net income from month to month. For instance, the typical income property for small real estate investors is a single family unit place of abode. Suppose a person much like yourself decides to invest in house that is being sold at or below bazaar value.

The business plan is to make minimum investments fixing up the house, and then rent out the house to someone with sub par credit that can’t get a loan for their personal house. To primarily pay for the house a mortgage loan is taken out. The monthly mortgage loan payments are calculated to be $850 and you plan on renting out the home for $1100 since there is a lack of rental homes in the area.

Right off the bat you have a gross operating boundary of $250 on this income property. Of course there will forever be other expenses, such as preservation and taxes, which you must pay. However, these extra expenses will still leave a nice little cash flow of profits for your pains. Bigger investors follow this tactic and buy an income property similar to an apartment building and will make bigger profits thanks to economies of scale.

Investment Property
The tactic behind an investment property is a bit different. Rather than focusing on present profitability similar to an income property investor, an investment property investor focuses on the large picture. The investor will purchase an investment property which allows him to at least break even or perhaps make a little profit from month to month. However, his main interest is holding onto the property for the extended term and selling the property while the market value has risen drastically. Over a span of 15 to 20 years, it is not unreasonable to wait for investment properties in hot real estate markets to double or even triple. Thus, the archetypal investment property investor has two resources. He has plenty of money on hand in addition to time to play the waiting game.

The investment property investor is not terribly interested in making money on his investment right now. That is not to say he is willing to lose money on the property from month to month, but he is willing to operate at much lower profit margins than your typical income property investor. The real objective of the investment property investor is to strike it rich down the road when he finally decides to the sell the investment property.

Both of these investment strategies serve up as viable business plans. What suits you best will depend on your needs in addition to your resources. If you have lots of money and time then an investment property could be way the go , but if you need to make money now an income property might be your best option.