What is an investment property?

An investment property is defined as real estate specifically acquired for the purpose of generating income. This can involve earning rental income from tenants, profiting from property value appreciation over time, or a combination of both. Investors often seek properties in various markets with the anticipation that they will provide financial returns, making this the primary characteristic that distinguishes investment properties from other types of real estate.

Properties that are lived in by the owner, such as primary residences, do not create income for the owner and thus do not qualify as investment properties. Similarly, a vacation home can be used personally by the owner, and while it may generate income if rented out, its primary classification often remains that of a personal property unless it is explicitly designated and operated as a rental investment. A property located in a declining market may present risks and challenges, but its classification as an investment property depends on the intent and potential for income generation rather than its market status. Therefore, the key feature of an investment property is that it is purchased primarily for income generation.