What is an investment property?
What is an investment property?
An investment property is an immovable property that is acquired to make a return on the invested capital.
Return on investment
Return on investment within property consists of direct and indirect return. Direct return on investment consists of the net rental revenue received by the owner in comparison to the purchase price of the property. Indirect return on investment consists of the increase of value between the moment of purchase and the sale of the property.
The definition of return on investment shows that it’s not a necessity to rent out an investment property. This is because the indirect return can cause the invested capital from the investor to grow between the moment of purchase and sale of the property.
Types of investment property
There are multiple concepts within the market regarding real estate and all these concepts can be quite confusing for a starting investor. The Central Bureau of Statistics defines real estate as follows, rental housing and non-housing. Non-housing is, for example, business premises, offices, retail premises and social property.
The highest return on investment
Starting property investors begin with a search for the cheapest investment properties with the highest return on investment. Many change their minds in this search as they realise that return on investment is based on risks. We know that every investor makes considerations regarding property according to internal and external factors. They do this to discover which property is the best for them to invest in. This is why it is wise to look further into properties than just their return on investment. A great example of this difference in consideration is when you take a retail entrepreneur who sold his company and now wants to invest part of his net capital. You will see that he will look differently at retail property than any particular investor who knows nothing about the retail market.
Return on your capital
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