Income Properties Differ From A Real Estate Investment

Industry Observer with Retired BC Realtor

Income Properties Differ From A Real Estate Investment

How an income property differs from a real estate investment .

Income property is to real estate investment as Apples are to Fruit. Income properties (Apples) are a kind of real estate investment (Fruit). However, not all real estate investments (Fruit) are income properties (Apples). 

What makes the difference ?

Real Estate Investments ( a general term ) Any form of Real Estatë can be bought for investment purposes . This includes raw land, houses, apartment houses, vacant warehouses, in short, any real estate, anywhere, can be bought for investment. Ten thousand acres of a swamp in Brazil ...Vast acres of desert land..A house in ski country ...A forty story skyscraper ...All real estate investments .

 Income Property ( a Real Estatë Investment that generates rental income ):

The name itself includes that element of income. In short, income property includes a real estate improvement which generates rental income out of which must be paid regularly recurring operating expenses. ( For example : real estate taxes , insurance, , heat, payroll, etc). All financing costs ( principal and interest payments) must also be paid from the rental income. Income Properties Differ From A Real Estate Investment

What is left over is the “cash flow” or “net income “ on the owners invested income . 

Why Income Properties Is So Attractive To Investors

A vacant industrial building can be bought for investment but not for income.

The same industrial building with rent paying tenants can be bought for income. Vacant land can be bought for investment but unless leased cannot be bought for income. The main reason that income makes such an attractive brokerage commodity. Is an investor can purchase it with relatively low cash down, finance 60-70 percent (sometimes more), and obtain enough income from the tenants to pay the operating expenses, the cost of financing, and give him or her a current return on their invested capital.

Why There Are Fewer Investors For Non-Income Property

Potential investors for non-income producing real estate (such as land) are in much shorter supply. They must not only have 50-100 percent cash available for the initial purchase but also must have sufficient capital to carry the year to year expenses, such as taxes, until the time comes to develop or sell their investment. For every such investor there are several thousand investors who are ready, willing and able to buy income-producing properties.

Special thanks to John Peckham for his training to many commercial and residential Realtors with his brokerage guide to income property brokerage .

Income Properties Differ From A Real Estate Investment


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Fred Carver

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