- Project plans
- Project activities
- Legislation and standards
- Industry context
Last edited 08 Jan 2021
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.
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.
 Related articles on Designing Buildings Wiki
- Business plan.
- Buyer-funded development.
- Cash flow.
- Corporate finance.
- Development appraisal.
- Internal rate of return.
- Investment decision maker.
- Investment Property Databank (IPD).
- Land value.
- Off-plan property.
- Real estate investment trust REIT.
- Speculative construction.
- Types of development.
Featured articles and news
ECA proposes strategies for the present and the future.
Paul Morrell to lead independent review of the construction products testing regime.
Standard will help employers foster wellbeing and manage psychosocial risks.
Global fire standards for safety of people and property.
An introduction to the 5 core principles of lean.
Can the profession use its skills to save the world from climate change?
How faulty science resulted in sanitation reform.
Improving facilities, accessibility and overall appearance.
Free download of TG 12/2021 available.
TESP works with The Youth Group to form skill sharing network.
Big tech collaborates on platform for the built environment.
Letter signed by 21 organisations sent to MHCLG.
A look at the Government's strategic approach.
Steps to help reduce the spread of infection inside buildings.
Click the button to subscribe.