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DEFINITION of 'Investment Property'

A real estate property that has been purchased with the intention of earning a return on the investment (purchase), either through rent (income), the future resale of the property, or both. An investment property can be a long-term endeavor, such as an apartment building, or an intended short-term investment in the case of flipping (where a property is bought, remodeled or renovated, and sold at a profit).

An investment property is like any other investment: the goal is to generate a profit. In real estate, this is achieved through income (rent, for example) or through a profitable resale. The way in which a property is used has a significant impact on its value. Investors sometimes conduct studies to determine the best - and most profitable - use of a property. This is often referred to as its highest and best use. Certain properties can be developed in more than one way (commercially zoned property, for example) and investors can maximize returns by determining the highest and best use.

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