What is meant by "investment property"?

Investment property refers specifically to real estate that is acquired with the intention of generating income or profit, either through rental payments or increases in property value over time, known as capital appreciation. This type of property is not primarily used for personal residence or enjoyment; instead, the focus is on the financial return it can provide to the investor.

The distinction lies in the intent behind the acquisition of the property. For instance, properties that are bought for personal use are not classified as investment properties because their main purpose is not to generate income. Similarly, properties used solely for vacation or recreational purposes do not fall under the investment property category, as they are not intended to provide financial returns. Inherited properties can also vary widely in their use and intent, and merely inheriting property does not automatically designate it as an investment property; instead, it’s the owner’s intent and how the property is utilized that determines its classification.

Therefore, the choice highlighting real estate purchased specifically to generate rental income or capital appreciation accurately defines investment property, aligning perfectly with the principles of real estate investment.