How is an "investment property" defined?

An investment property is fundamentally defined as a property acquired with the primary purpose of generating income. This can include residential rental properties, commercial properties, or land that has the potential to appreciate in value and or generate revenue through leasing or other means. Investors look for properties that can provide cash flow from rental income, capital appreciation over time, or both.

The focus on income generation is key to differentiating investment properties from those used for personal or collateral purposes. For instance, properties that serve strictly as residences or are purchased for personal satisfaction do not fall under the investment property category, as they do not aim to produce a return on investment.

In addition, while tax benefits might be associated with owning investment properties—such as deductions for mortgage interest or property depreciation—the primary goal remains income generation. Thus, the emphasis on income-producing capability distinguishes investment properties from others that may provide various benefits but do not contribute directly to financial returns.