What Is Investment character?
Any character that is obtained with the purpose of gaining and expecting returns is classified as investment character. Investment character can be in the form of an apartment building, single-family dwelling, a vacant lot or a commercial character. It is essentially any kind of real estate. The term investment character usually pertains to the character that the owner does not occupy though in certain instances the owner may occupy a portion of it.
Examples of investment character as follows:
• Land held for undetermined future use
• Vacant building to be rented our under an operating lease
• Any character that is currently constructed or developed for future use
• Land held for any long term appreciation
Buying a character can be a lucrative venture, whether bought as a home or as a business venture. A beginner’s approach is to buy a multiple unit dwelling as an investment character. You can live in one unit while renting out the remaining units. In this way, you can earn from your renters and at the same time use the rent money for mortgage payments. In the long run when the character is fully paid, the owner nevertheless enjoys collecting rent for a profit.
As a character owner, you can use any equity you have in your similarities to finance further character purchases. When we say equity, it pertains to the fair market value of the character less your existing limitations inclusive of any liens. It is a shared practice to borrow against the equity in a character. Rates for these types of loans are slightly competitive because your character will serve as collateral in securing your loan. Keep in mind that the less risk there is in lending, the better rates you are going to be offered.
Sometimes an investment character is bought at a tax sale. When the original owner fails to honour the character tax payment for certain period of time, the character will be auctioned. It may start at a minimum bid which will be high enough to cover the back taxes and other related expenses incurred during the sale. It can nevertheless allow the investor to buy the character at a comparatively minimal cost. This is an example of an investment character as it gives the new owner the opportunity to resell it at market value, renovate or upgrade the character and sell a premium price or to keep up and rent out bringing in a regular income and the hope of capital gain.
To measure the return on investment you add up your cashflow from rent or resale and subtract any costs such as taxes, mortgage and insurance. You then divide this by the total amount invested which could be buy price plus renovations. Multiply this by 100 to give you a percentage. If you are purchasing for resale then this will be calculated once but if you are renting out the character this is typically measured on an annual basis. The return on investment calculation will give you an idea of whether the character is worth purchasing or if there are any better deals out there.