NBREA Real Estate Practice Test

An investment property is defined as real estate that is acquired primarily for the purpose of generating rental income or appreciating in value over time, rather than for personal enjoyment or use. This distinction is essential in real estate investment, as the goal is typically to generate a return on the investment through leasing it out to tenants or selling it for a profit in the future.

The nature of investment properties focuses on financial returns rather than personal utility. This means that whether it's a residential multi-family home rented out to tenants or a commercial building leased to businesses, the primary motive is to build wealth through real estate.

Other types of properties, such as those primarily used for personal enjoyment, would not typically fall under this definition, as the intent behind owning such properties is personal pleasure rather than investment return. Short-term flip investments may involve purchasing properties with the intention of quickly reselling them for profit, but the focus is often on immediate resale rather than long-term income generation. Similarly, a residential home intended for resale might be considered a short-term investment rather than an investment property in the traditional sense, as it does not involve generating income through rental. Thus, real estate specifically bought for rental income or capital appreciation is best categorized as an investment property.