Last update 21/08/2019
Investment property is property (land or a building—or part of a building—or both) held (by the owner or by the lessee as a right-of-use asset) to earn rentals or for capital appreciation or both, rather than for:
- use in the production or supply of goods or services or for administrative purposes; or
- sale in the ordinary course of business.
Owner-occupied property is property held (by the owner or by the lessee as a right-of-use asset) for use in the production or supply of goods or services or for administrative purposes.
Investment property is held to earn rentals or for capital appreciation or both. Therefore, an investment property generates cash flows largely independently of the other assets held by an entity. This distinguishes investment property from owner-occupied property. The production or supply of goods or services (or the use of property for administrative purposes) generates cash flows that are attributable not only to property, but also to other assets used in the production or supply process. IAS 16 applies to owned owner-occupied property and IFRS 16 applies to owner-occupied property held by a lessee as a right-of-use asset.
The following are examples of investment property:
- land held for long-term capital appreciation rather than for short-term sale in the ordinary course of business.
- land held for a currently undetermined future use. (If an entity has not determined that it will use the land as owner-occupied property or for short-term sale in the ordinary course of business, the land is regarded as
held for capital appreciation. - a building owned by the entity (or a right-of-use asset relating to a building held by the entity) and leased out under one or more operating leases.
- a building that is vacant but is held to be leased out under one or more operating leases.
- property that is being constructed or developed for future use as investment property.
What to buy
- Attractive features – Look for investment properties that will appeal to as many people as possible, like a second bathroom, lock up garage or nearby shops, schools and transport.
- Wide appeal – Find a property that will attract more than one segment of the rental market such as singles, couples, young families or retirees.
- Low maintenance – Keeping costs down is important, older homes or those with features such as a pool or extensive landscaping may cost more to maintain.
- Property type – Units can be easier to maintain than houses, although you will have to pay body corporate fees.
Investment property
Investment property
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