With inflation, layoffs, and home prices continuing to rise, a lot of people are looking at alternative ways to save for retirement and supplement their income. One of these ways is through purchasing and managing rental property. In this article, we’ll explore what an investment property is and what it means to own and manage one.

An investment property is a piece of real estate purchased with the intention to earn a financial return based on rental income or future resale. It can be held by an individual, a group of investors, or even a corporation. This type of investment is sometimes referred to as “flipping” because it can involve buying, reworking, and selling properties quickly for a profit.

Essential Tips for Buying an Investment Property in a Competitive Market

Buying an Investment Property can include single-family homes, condominiums, townhomes, and apartments, or even commercial structures such as warehouses and office buildings. Unlike personal use or vacation properties, those purchased for rental purposes are typically viewed as business assets rather than dwellings to be occupied by the owner. This distinction impacts how they are managed, financed, operated, and taxed.

Rental properties add an extra income stream, providing a steady source of money that can help pay mortgage repayments, strata fees, council fees, and maintenance costs. Depending on the location and the property’s condition, it may also be possible to claim tax deductions for a portion of the rent received and depreciation of fixtures and fittings.

It’s important to research the area where you’re planning on investing to get a sense of rental demand and the potential yield. Checking things like days on the market and vacancy rates can give you insight into how competitive the area is. Similarly, knowing what features tenants are looking for can help you determine the maximum rental value of a property.