Investment Real Estate
What it is:
How it works/Example:
Often, an individual may own numerous residential properties and live in only one of them. The additional properties may be used to generate rental income or profits from increases in market value. When used for such purposes, these properties qualify as investment real estate.
To illustrate, person X owns a two-family house in addition to the house that person X lives in year-round. Person X rents out the two-family house and receives $1000 each month in rental income. This qualifies the two-family house as investment real estate.
To illustrate, from a market perspective, suppose person X keeps a watchful eye on the market value of that two-family house. One day person X sees a major jump in the house's value, and decides it's time to sell. Even if the house was not rented to tenants at the time, it would still qualify as investment real estate, because since person X does not inhabit it and is selling it in order to make a profit.