What is an Income Property?

An income property refers to a piece of real estate that is purchased or developed primarily in order to earn income by renting or leasing it out to others, with a secondary goal of price appreciation. Income properties, which are a subset of investment properties, may be either residential or commercial.

Investors must take several factors into consideration when considering an investment loan—such as interest rates and the housing market environment—before purchasing an income property, as there can be unique risks associated with this kind of investment.

KEY TAKEAWAYS

• An income property is purchased or developed to earn income by renting or leasing it out to others or through price appreciation.

• Income properties may be both commercial and residential.

• Owners should have a financial cushion to pay for repairs, maintenance, and other costs such as property taxes in case of emergency.

• Although they may generate income, owners should consider the risks including interest rates, housing market conditions, and disruptive tenants.