Investment property
Investment property is real estate that is used for the purposes of investment, with the aim being to earn a financial return. This return can be earned either through rental income, the capital gain on future resale of the property or, as is typical, both.
A common type of investment property is an apartment building or rental house, which the owner uses to gain ongoing rental income from tenants rather than using a primary residence.
Investment property can be either long-term, whereby the owner generates capital gains as property values increase over time, or short-term, which is known as 'flipping' - real estate bought, redeveloped or renovated, and sold at a profit. If an investment property is sold for a higher price than it was purchased for, then it will be subject to capital gains tax.
The value of an investment property can be influenced considerably by the way it is used, and property investors typically investigate the most profitable use of a property prior to beginning redevelopment. For example, they will assess whether a piece of real estate near a busy urban high street will have a higher rate of return as a residential or commercial building.
Like all investments, property carries some degree of risk. Typically there is less risk if the property is high quality and in a 'prime' location, although the risk still remains that an investor may pay too, the market will drop, the cost of redevelopment will go up, there are delays, permissions are not received, purchasers do not come forwards and so on. Lower quality property in less a prime location may present more risk but can demonstrate high capital growth, in particular if the area experiences a period of gentrification.
Some of the unique characteristics of investment property include:
- Unlike stocks and shares, property is not a standardised investment. No two properties are the same.
- Property is not a pre-packaged investment - owners have to manage the property.
- Property can often be improved by active management, such as refurbishment, renovation, and so on.
- Property can be created by acquiring land or rights to land.
- Property can be traded at auction or sales, and purchases can be negotiated by estate agents and surveyors, but there is no single market.
- The physical structure of a building may require further investment, but the land on which it stands will not.
- The property investor can have different forms of title from owning the property as a freehold, a long leasehold, short leasehold, and so on.
[edit] Related articles on Designing Buildings Wiki
- Business plan.
- Buyer-funded development.
- Cash flow.
- Corporate finance.
- Developer.
- Development appraisal.
- Internal rate of return.
- Investment.
- Investment decision maker.
- Investment Property Databank (IPD).
- Land value.
- Off-plan property.
- Premises.
- Profitability.
- Real estate investment trust REIT.
- Speculative construction.
- Stakeholders.
- Types of development.
- Yield.
Featured articles and news
Types of building sensors on BD
From biometric to electrical current, chemical and more.
Government mandates detectors in rented homes
Changes are due to come into force on 1st October 2022.
80% of major government projects are rated red or amber
Heed advice and insight of this report IPA tells the government.
The end of the games but continued calls for action
From the Commonwealth Association of Architects.
CIOB respond to the government call for evidence
For the Levelling Up, Housing & Communities Committee.
How are buildings and their occupants responding to extreme heat?
BSRIA's Technical Director reflects on recent weather patterns.
Landownership in England in 1909
A national valuation to fund old-age pensions.
The world’s largest Commonwealth memorial to the missing.
Long after the end of the defects liability period.
BSRIA Occupant Wellbeing survey BOW
Occupant satisfaction and wellbeing in buildings.
Geometric form and buildings in brief
From the simple to the complex.
Understanding the changing nature of insulation
And the UK Government guidelines.
Three year action plan to improve equity, diversity and inclusion
Commitment agreed to by major built environment bodies.
The Construction Route – what needs to change?
Electrical skills, low carbon, high-tech and the building services revolution.
Deep geothermal power possibilities
Ultra-deep drilling with millimeter-wave beam technology.
BSRIA Briefing 2022- From the outside looking in
Looking at the built environment from space.
Competence requirements for principal contractors and designers
BSI standards 8671, 8672 and 8673.
Bringing life to burial grounds.
From failed modernism to twenty-minute neighbourhoods.
Design chill and design freeze
The gates process and change control.