What to Know About Buying an Investment Property

An investment property can bring in income if you rent or resell it, but the buying process can be complicated.
Linda Bell
By Linda Bell 
Updated
Edited by Beth Buczynski

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An investment property is real estate bought for the purpose of generating income. Buying an investment property can come with challenges, such as maintenance costs and more stringent financing requirements — including higher interest rates and a larger down payment — compared with mortgages on primary homes.

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What is an investment property?

Buying an investment property allows you to generate income through the renting or resale of a property that isn't your primary residence.

Investment properties can be residential, such as single-family homes, townhouses or condominiums, or commercial properties, which are zoned for businesses such as hotels, restaurants and retail shops.

Investors in residential properties try to make money by collecting rent from tenants or by renovating the property and quickly reselling it for a profit, known as house flipping. The property can also be held long enough to increase in value over time, then sold.

Detached single-family homes are the most common type of residential investment property, according to the National Association of Realtors.

» MORE: The basics of buying a second home

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