Income Property is a piece of real estate that is purchased and developed with the purpose of generating income through renting or leasing the purchased or developed property to others.
Other than buying a property for the purpose of income, the secondary purpose of income property is to purchase or develop real estate that has the potential to appreciate.
Since appreciation of real estate is a goal when purchasing or developing real estate, interest rates, and the housing market should be scrutinized because there are unique risks associated with this kind of investment.
There are many ways to own income property. Sometimes you don’t need to develop or purchase a new place to own income property. Income Property can be owned by homeowners too.
Those that sublet part of their home can earn income while living there. Individuals that sublet their homes own what is called an owner-occupied income property since they serve as both the owner and the landlord.
A non-owner occupied property is a situation where Individuals or companies develop or purchase an income property solely for rental and leasing purposes. The owner doesn’t occupy the property and it is retained for income-earning purposes.
Location of a property for the purpose of developing or purchasing an income property is important. The location will need to be analyzed in order to understand the demand for housing in the area as well as the rental pricing for the property under consideration.
The cost of maintaining the income property should be considered. If an income property is situated in a complex governed by a body corporate, then the monthly fees on the property should be added to the rent or lease amount.
Costs associated with renovation should also be added to the property cost and the cost should include the frequency of renovations.
Acquiring an income property requires money and where to leverage the money should be clearly stated. A budget will have to be in place including operational costs that will be incurred until profitability.
There are several ways that you can use to get an Income Property. Ways that can be used to acquire an income property are listed below.
What is the better way to attain an Income Property than to leverage through a bank loan? Unlike a store credit or personal loan, acquiring an income property loan is not as easy. An individual or company that is interested in an income property loan needs to have a good credit rating.
Furthermore, consistent income is required to qualify for this type of loan. SARStax returns may be required so that the lender can evaluate whether or not you are declaring the same income as per the bank statement with SARS.
You need the following documents to apply for an income property loan:
Flipping is a strategy that is used in real estate investing and it can be used to acquire an income property. This process requires money and there are many ways that you can gather money to flip a property. Flipping involves the purchase and renovation of a dilapidated property in return for an increase in the property’s value.
Money to flip a property and turn it into an income property can be sourced through:
Developing or purchasing income property with your own money is an option. You will cover the sum of the building costs or purchasing costs on an income property.