What is an investment property?

An investment property is generally categorized as a real estate property that is not occupied by its owner and is used to generate rental income or is held for capital gains. Owning a property as an income-producing investment is a common way for investors to diversify their portfolios, and move away from the stock market or other investment funds.

Over 1.1 million homes were purchased as investments in 2008, which was roughly 21% of all existing- and new-home transactions.1 Despite a decrease from 2007, purchased properties for investment purposes were still over 1/5th of the entire market and the long term outlook for increased demand is positive.2

Investment properties can range from single family residential homes to commercial buildings and retail complexes; indeed, finding the ?right? investment property is largely a matter of opinion. When starting the search for an investment property, it"s important to have a plan. Start by researching potential cities or neighborhoods of interest and learn about investment opportunities through landlords or real estate agents in the area. Be sure to consider the length of time for the investment; there are both advantages and disadvantages to owning a rental property for the short term and the long term. Also, be aware of pricing and make sure that the rental income will cover your expected expenses and maintenance, even taking possible vacancies into account.

Investment properties are a smart way to invest funds, benefit from tax breaks, and gain equity. Whether a single family home or a retail strip center, investing in real estate is a common and often lucrative way to expand investments and plan for the future.