Is an Income Property The Right Investment For You?

There is a wide variety of investment opportunities that a person can take advantage of. The mortgage crisis proved the old adage “real estate is always a good investment” to be not entirely accurate.

However, when done right, real estate investment can be great in both the short and long term. 

The main aspect of real estate investment is what’s known as the “income property”. Investors can purchase a property and then make money off of it in various ways. It’s common to rent or lease the property to people looking to use it. It’s also possible to simply invest in improving the property and then reselling it. Holding the property long term can allow property values to increase as well. Quite simply, when done right, an income property can pay off! 

Renting Out Residential Property for Income

This is one of the most common ways that people make money through income properties. Being a landlord features many legal responsibilities for upkeep of the property and living conditions. Renting out residential property isn’t the most complicated thing. Simply list it for rent and provide a lease to the applicant you choose. If the area lacks rental properties, then it’s possible there will be high demand. Be careful of areas in which there's not enough demand for rental properties. Prices will be lower and there's no guarantee of getting tenants. 

One aspect that can be difficult about using this method of generating income is getting finances for it. If you can afford to purchase a second home, then that’s no problem. Many people think they can get a mortgage for an income property and simply pay that off when tenants pay rent. It’s important to note that mortgages for “non-owner occupied” properties can come with much higher interest rates than a traditional interest rate. Lenders don’t see it at the same risk level, since if tenants don’t show up, they might not get paid. 

Commercial Income Properties

There is not a lot of difference between residential properties and commercial properties for generating income. Both work as lease and rental opportunities. The requirements of businesses are obviously different than they are for individuals. Additional features like office furniture, access to business features and specialized equipment may be something required. 

Commercial properties are often far more expensive than regular properties. One way this can be worked around is joining a property investment group. The group is run by a board, which in turn uses the money from investment opportunities to purchase and run commercial properties for rent. It’s a good way to get involved in commercial investment in real estate without needing a huge starting fee. 

House “Flipping”

The concept of house flipping is fairly easy. A property is purchased, and then it’s improved to be resold. Flipping seems like a simple process. There are many different TV shows that show couples and duos buying a home, fixing it up, redesigning the interior and making a huge profit on it. 

The reality is much more difficult. If a housing market stops increasing, then the buyer could be left trying to sell at a huge loss. Increasing the house value more than the value of improvements isn’t always possible as well. To truly make some serious profit with house flipping, it’s likely that much of the repair work needs to be done by the investor themselves. The more they can do, the less they need to pay for! Location also matters. Improving a home in a neighborhood that can’t support a high end sale won’t provide benefits either.