Investment Property: Part 1 - Real Estate Article

By:Adam Smith

1. Investment Property

What exactly is an investment property? Since this is real estate investments 101, we will explain. An investment property is a piece of real estate you invest in with the objective of earning a return. Primary residences are not considered investment properties because the primary purpose of such real estate is to provide a place to live. Common investment properties include rental homes, apartments, condos, townhouses as well as commercial properties such as business or industrial parks and shopping centers.

2. Depreciation

Depreciation is a fancy business way of saying something is decreasing in value. Investment properties may experience depreciation, because typically as a building ages the value of the physical building depreciates. It is important to note the actual depreciation realized is related specifically to the value of the physical building. Historically, real estate prices seem to follow a positive trend. How can this be if old buildings have experienced severe depreciation and thus are worth less today than 20 years ago? We must look at the whole equation. The value of the land is integrated into the equation as well, and traditionally land increases in value. Thus, when we look at investment properties, we normally see an increase in value thanks to the seemingly continuous appreciation of the land the building was built on.

3. Land Contract

A land contract is fairly simple. When you are looking to invest in some property, you will negotiate a price for the land. The written manifestation of these verbal negotiations is a land contract. The land contract for the investment property outlines the terms of the agreements, such as the monthly payments, interest rate, and maturation date of the loan.

4. Land Auction

You might have heard other real estate investors talk of a land auction. A land auction is one way of buying an investment property. In a land auction, land is auctioned off to the highest bidder. Often times one can score a real deal on property auctioned off in such events. Upon winning an auction, you can then sign a land contract for the property and hope your investment property experiences appreciation, rather than depreciation, so that you can cash in on your increased equity a few years down the road.

5. Lien

Before buying an investment property you will want to make sure the property does not have a lien against it. A lien is basically legalese for a claim against the property. A lienholder owns a legal right to extract their money from a property should the borrower default. Thus, if you buy a property that has lien on it, and the person you bought the property has defaulted on their loan, you may find yourself in second standing for right to the property behind the bank that has the lien. It is important to do your due diligence and ensure you are not setting yourself up for a fall by investing in property that can be claimed by others.

Conclusion

Keep in mind that real estate investment can become rather complex. However, if you gain a good grasp on the fundamentals of investing, such as depreciation, liens, and land contracts and auctions, you will be in a position to earn a positive return on your investment property for many years to come.

Digg del.icio.us Blink Stumble Spurl Reddit Netscape Furl

Article keywords: investment property, lien, land auction, land contract, depreciation

Article Source: http://www.articles2k.com

Adam Smith is an internet marketer specializing in affiliate program management for 10Xmarketing.com. More information regarding investment property can be found at OneMinuteMillionaire.com.

Top Real Estate Articles
1). When Daddy Moves to an Apartment By : Kyle Thomas Haley Divorce is hard, there’s no question about it. Not only has your marriage ended but, most likely, your lifestyle is undergoing some drastic changes also. This is especially true if you are forced to leave the place that was home to you and your family. Depending on your particular situation, you may find that moving into an apartment is your only option.
2). Alternative Investments – Which Is the Best for Your Portfolio? By : Stephen Todd If you are looking at alternative investments the one we consider the best has an average gain of 920% over 20 years and has outperformed shares and property with less downside risk.
3). The Pitfalls of Selling Your Home Alone By : Andrew Webber Many homeowners think that selling home alone without the help of a Realtor will help simplify the process and will save them money in the end. The fact of the matter is that selling your home on your own isn't easy work. In fact, you may actually lose a substantial amount of money when you try to sell your home alone because you aren't well spoken in the language and business of real estate.
4). Flip That House Style Real Estate Investing By : David Neese I love those TV rehabbing shows like Flip That House. On the show people buy a house needing to be seriously updated and repaired. Usually the kitchen is heavily upgraded with new cabinets, cutting edge appliances, new countertops and more. The bathrooms are completely redone with new tile, tubs, showers, sinks and more. The living rooms and other areas usually have walls taken out to open up the floor plan and usually carpet is replaced with some type of hardwood flooring.
5). Where Real Estate Investing and Speculation Collide By : Bruce W. Ford Some uninformed folks would describe someone who rehabs distressed property as a "speculator" or even a "property speculator." Don't be fooled! There is a VAST CHASM of difference between rehabbing and property speculation. Let me explain. According to Dictionary.com, the definition of speculation where business is concerned is: "Engagement in risky business transactions on the _chance_ of quick or considerable profit.
6). How To Find A Real Estate Agent By : Steve Gillman It's easy to find a real estate agent. Just put a for sale sign in the yard and wait for the phone to ring. The question is, how do you find a GOOD real estate agent? You can start with newspaper. Pick up the Saturday or Sunday paper - whichever day they have all the homes for sale in your area. You can also collect a few real estate guides to look through.
7). Home Sales Continue to Drop In Southern California By : Andy Goldman Home sales are dropping in Southern California. For the fourth month in a row, home sales have continued top drop, according to data for March.
8). Relocating to Tampa Bay A Great Place to Call Home By : Kael Its no wonder that Florida’s Tampa Bay area has become such a popular choice for relocating adults and families to call home. The west coast of Florida has mile after mile of white, sandy beaches and magnificently, beautiful natural resources. These areas include the city of Tampa, Clearwater, St. Petersburg, as well as Palm Harbor, Tarpon Springs and Oldsmar.
9). Real Estate Rentals - Selling For More By : Steve Gillman Selling real estate rentals isn't like selling houses. You can paint a house, and get a little more because it looks nice. Rental properties, especially larger ones, are different, because they're bought by investors, who look at income more than new paint. Raise the income, and you increase value to investors. Time to learn about capitalization rates.
10). New Hampshire Real Estate – Switzerland of America By : Raynor With soaring mountain ranges, New Hampshire is often called the Switzerland of America. Fortunately, New Hampshire real estate prices compare favorably to Switzerland. New Hampshire New Hampshire is a state with beautiful scenery that takes on the full effect of each season of the year. Spring and summer are tailor made for fishing, hiking and water sports along the state coastline.

New Real Estate Articles
1). Real Estate Agent Web Site; Clean, Simple and Effective By : Lanard Perry Great website designs focus on 3 basic values: simplicity, clarity, and speed. A site that is visually appealing, but at the same time downloads quickly and is easy to navigate is optimum.
2). Errors Made by Real Estate Investors By : Kris Koonar Some decisions need to be well thought out and considered. Real estate issues are no exception.
3). Why Real Estate By : Kris Koonar When you look at the lists of the wealthiest people in the world, most of the names there have one thing in common. They are all massive property owners.
4). Real Estate Lead Generators; Business Building Ideas Are All Around You By : Lanard Perry Real Estate Lead Generators abound, and everyday you are presented with opportunities to generate leads and earn commissions.
5). Custom Real Estate Web Design: Key To Increased Income By : Lanard Perry The Internet is a primary tool for effectively online, mainly because it has such a wide reach. Through Custom Real Estate Web Design you can market to millions of people as easily as you can several hundred thousand.
6). Tips for Successful Investing By : Kris Koonar One of the quickest paths to financial freedom and security is through the world of real estate investing. Millionaires and even billionaires have been made on the real estate market
7). Moving In Your New Home By : Jonathon Hardcastle Now that the paperwork belongs to the past and the movers have left leaving you alone to admire your new property, it is time to sit down and list all those things you will have to do before being able to relax on your couch or back yard and admire your new possession.
8). Costa Maya Real Estate Search - Trip Planning Guide By : Christine Harrell After all, the opportunity seems too good to be true with 57 miles of virtually uninhabited Caribbean coastline, property prices as low as $65,000 per lot, and a government funded project to boost tourism and property value.
9). Real Estate Marketing Reports; Instant Web Site Content By : Lanard Perry It can take months, and in some instances years to personally write enough web site copy to have an effective, lead generating web site. On the other hand, you can purchase volume content for pennies on the dollar and upload it to your web site in minutes. So, why settle for adding a page 1-2 times a week when you can add hundreds of pages whenever you want to.
10). Investing In Property In Mexico Means An Investment In Your Health By : Christine Harrell Many Americans who have purchased property in Mexico have discovered even greater wealth than that of their fast rising property values.