What is an investment property? It is any property that you hold as an investment, similar to owning stocks or bonds.
Types of Investment Properties
A single family home you rent out
Duplex, triplex, fourplex (anything over 5 units has different tax issues)
Raw Land Raw land is fairly easy to deal with – you buy it, pay property taxes, and hope the value goes up.
Single Family Home or Up to 4 Units Some people decide to rent their home instead of selling it, when they move into a larger home. A single family home is in some ways easier to deal with than a 16-unit apartment building, but you may use up the money you are making if you can't do the repairs yourself. There are similar issues if you decide to purchase 2-4 units. You will want the home or units to be in good repair (think about local city codes) before you rent a house or unit.
What if the tenant doesn't pay their rent or they trash their living area? Well, that is why you have a deposit, an extra deposit if you decide to allow pets, and a good lawyer, just in case. Nothing with an investment is a sure thing. That said, everyone needs somewhere to live, and many people aren't good at saving enough for a down payment, so they end up renting most of their lives. Why shouldn't you be the one to deposit the monthly rental check into your account? There are also tax benefits to owning rental property (speak with your tax accountant).
Commercial Building A commercial building is probably going to cost more than a single family home, but you could start out with a smaller building, and over time move to larger buildings. The larger your commercial building is, the more likely that you will want to hire a manager to deal with the tenants and any property repairs that will need to be made.
As the owner of the building, you will need to have lease agreements with your tenants, and these agreements are often complicated, so you will want to use your real estate broker, and perhaps your attorney, to help create the lease agreements. But imagine the amount of income you will be receiving, the larger the building and the more tenants you have.
It is very important, at the time of purchase of the commercial building, to be aware of all associated costs (property taxes, insurance, etc.), and that the building is up to code.
Varga & Nickel Real Estate Group can assist you in deciding if an investment property is right for you. Be sure to check with your tax accountant as to how this type of investment may affect your income taxes.
Norm Haley Real Estate
135 W. Foothill Blvd., #4 Monrovia, CA 91016 DRE#00528924