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What is Investment Property in turkey

What is Investment Property in turkey

What is Investment Property in turkey

What is Investment Property in turkey

Investment property is real estate property that has been purchased with the intention of earning a return on the investment, either through rental income, the future resale of the property or both. An investment property can be a long-term endeavor or an intended short-term investment such as in the case of flipping, where real estate is bought, remodeled or renovated, and sold at a profit.
The way in which an investment property is used has a significant impact on its value. Investors sometimes conduct studies to determine the best, and most profitable, use of a property. This is often referred to as the property’s highest and best use. For example, if an investment property is zoned for both commercial and residential use, the investor weighs the pros and cons of both options until he ascertains which one has the potential for the highest rate of return, and then utilizes the property in that manner.

Difference Between Financing a Home and an Investment Property

While borrowers securing a loan for a primary residence have access to an array of financing options, including FHA Loans,VA Loans and conventional loans from a variety of banks; in most cases, it is more challenging to procure financing for an investment property than for a primary residence.
In particular, insurers do not provide mortgage insurance to investment properties, and as a result, borrowers need to have at least 20% down to secure bank financing for investment properties.
Additionally, to approve borrowers for a mortgage for an investment property, banks insist on good credit scores and relatively low loan-to-value ratios. Some lenders also require the borrower to have ample savings to cover six months’ worth of expenses on the investment property.

Reporting Earnings From Investment Properties

If an investor collects rent from an investment property, the Internal Revenue Service (IRS) requires him to report the rent as income, but the agency also allows him to subtract relevant expenses from this amount. For example, if a landlord collects $100,000 in rent over the course of a year but pays $20,000 in repairs, lawn maintenance, and related expenses, he reports the difference of $80,000 as self-employment income.

Capital Gains on Investment Properties

If an individual sells an investment property for more than he purchased the property, he has a capital gain and must report these earnings to the IRS. As of 2016, the agency taxes these gains at a rate ranging from 0 to 15%. In contrast, if a taxpayer sells his primary residence, he only has to report capital gains in excess of $250,000 if he files individually and $500,000 if he is married filing jointly. The capital gain on an investment property is its selling price minus its purchase price minus any major improvements.
To illustrate, imagine an investor buys a property for $100,000 and spends $20,000 installing new plumbing. A few years later, he sells the property for $200,000. After subtracting his initial investment and capital repairs, his gain is $80,000.

Property Management

Property management is the administration of residential, commercial and industrial real estate including apartments, detached houses, condominium units and shopping centers. Property management typically involves the managing of property that is owned by another party or entity. The property manager acts on behalf of the owner to preserve the value of the property while generating income.
Some real estate brokers also operate as property managers. For example, a broker in a resort town may provide buyer and seller agent services, as well as property management services. When this is the case, the real estate broker also lists, shows and leases vacation rentals. Property managers help owners create budgets, advertise rental properties, qualify tenants, collect rent, comply with local landlord-tenant and real estate board laws, and maintain properties. Preventive maintenance, interior and exterior cleaning, and construction all fall under the scope of a property management company’s responsibilities. Owners pay property managers a fee or a percentage of the rent generated by a property while under management.

Reasons for Hiring Property Managers

Property owners hire property managers for various reasons. Some owners may have many rental properties in their portfolios but lack the time or expertise to maintain the properties and deal with tenants. Some owners have an interest in owning rental properties and earning profits from them only. When this is the case, they hire professional property managers. Absentee landlords also make use of property management services.
Property owners who participate in affordable housing programs sometimes make use of property management services. This is because participating in such programs requires knowledge of federal guidelines that some owners do not have, even though they wish to reap the benefits of affordable housing programs. When this is the case, such owners hire property management companies with the appropriate expertise.

Property Management Credentials

Property management licensing requirements vary among the states. Most states require property management companies to be licensed by the local real estate board. Holding a real estate broker’s license allows property managers to list rental properties in the multiple listing service (MLS) and to market the properties by standard real estate marketing methods. Holding a real estate broker’s license also allows the property management company to place a real estate board lockbox on a property’s door so that other licensed agents can show the property. States such as Delaware, Florida and Illinois require property management companies that provide on-site management services to condominium communities to hold community management licenses.

Income Approach

The income approach is a real estate appraisal method that allows investors to estimate the value of a property by taking the net operating income of the rent collected and dividing it by the capitalization rate. The income approach is typically used for income-producing properties and is one of three popular approaches to appraising real estate. The others are the cost approach and the comparison approach.
When using the income approach for purchasing a rental property, an investor considers the amount of income generated and other factors to determine how much the property may sell for under current market conditions. In addition to determining whether the investor may profit from the rental property, a lender will want to know its potential risk of repayment if it extends a mortgage to the investor.

Determining Capitalization Rate

When determining the property’s net operating income (NOI), an investor uses market sales of comparable properties for choosing a capitalization rate. For example, when valuing a four-unit apartment building in a specific county, the investor looks at the recent selling prices of similar properties in the same county.
After determining a capitalization rate, the investor adjusts the rate based on the property’s characteristics. For example, the property may have higher-quality tenants than other nearby properties, which would slightly reduce the capitalization rate. On the other hand, the property may be less appealing than others in the area, which would slightly increase the rate. The capitalization rate should be set within 50 basis points of the market average. For example, an average market capitalization rate of 8% most likely values the property between 7.5% and 8.5%.
After calculating the capitalization rate, the investor can divide the rental property’s NOI by that rate. For example, a property with an NOI of $700,000 and a chosen capitalization rate of 8% is worth $8.75 million.

Other Property Considerations With the Income Approach

When using the income approach for purchasing a rental property, an investor must also consider the condition of the property. Potential large repairs that may be needed can substantially cut into future profits.
In addition, an investor should consider how efficiently the property is operating. For example, the landlord may be giving tenants rent reductions in exchange for completing yardwork or other responsibilities. Perhaps specific tenants are facing economic difficulties that should turn around in the next few months, and the landlord does not want to evict them. If rent being collected is not greater than current expenses, the investor will most likely not purchase the property.
An investor must also ascertain how many units on average are empty at any given time. Not receiving full rent from every unit will affect the investor’s income from the property. This is especially important if a property is in great need of repairs and many units are vacant. If the units are not filled on a regular basis, rent collection will be lower than it could be, and purchasing the property may not be in the investor’s best interest.

Property Rights

Property rights refer to the theoretical and legal ownership of specific property by individuals and the ability to determine how such property is used. In many countries, including the United States, individuals generally exercise private property rights – the rights of private persons to accumulate, hold, delegate, rent or sell their property. In economics, property rights form the basis for all market exchange, and the allocation of property rights in a society affects the efficiency of resource use.
The term “property” is very expansive, although the legal protection for certain kinds of property varies between jurisdictions. In most developed countries, for example, the rights of property ownership can be extended by using patents and copyrights to protect scarce physical resources (such as houses, cars, books, shoes, land, tire irons or cellphones), non-human creatures (such as dogs, cats, horses or birds) and even some intellectual property (such as inventions, ideas or words).

Basics of Private Property Rights

Private property rights are one of the pillars of capitalist economies, as well as many legal systems and moral philosophies. Other types of property, such as communal or government property, are legally owned by groups but practically enforced by individuals in positions of political or cultural power.
Within a private property rights regime, individuals need the ability to exclude others from the uses and benefits of their property. All privately owned resources are rivalrous, meaning that only a single user may possess the title and legal claim to property. Private property owners also have the exclusive right to use and benefit from the services or product. Private property owners may exchange the resource on a voluntary basis.

Acquiring Rights to a Property

In a non-private property rights regime, the ownership and use of resources is allocated by force, normally by the government. Such governments determine who may interact with, can be excluded from or may benefit from the use of property. Resources in a non-private property rights regime are allocated by political ends, rather than economic ones.
Individuals in a private property rights regime acquire and transfer in mutually agreed-upon transfers, or else through homesteading. Types of mutual transfers include rents, sales, voluntary sharing, inheritances, gambling and charity. Homesteading is the unique case; an individual may acquire a previously unowned resource by mixing his labor with the resource over a period of time. Examples of homesteading acts include plowing a field, carving a stone and domesticating a wild animal.

Private Property Rights and Market Prices

Every market price in a voluntary, capitalist society originates through transfers of private property. Each transaction takes place between one property owner and another person interesting in acquiring the property. The value at which the property exchanges depends on how valuable it is to each party.
Suppose an investor purchases $1,000 in shares of stock in Apple Inc. In this case, Apple values owning the $1,000 more than the stock. The investor has the opposite preference, and values ownership of Apple stock more than $1,000.

Personal Property

Personal property, in its most general definition, can include any asset other than real estate. The distinguishing factor between personal property and real estate is that personal property is movable; that is, the asset is not fixed permanently to one location as with real property, such as land or buildings. Examples of personal property include vehicles, furniture, boats, and collectibles.
Personal property is also known as movable property, movables, and chattels.
Under common law systems, it is possible to place a mortgage upon real property. Because the lender has rights to the property, it makes the extension of credit relatively safe and easy. After all, it’s tough to flee the country with your house.
On the other hand, it’s tougher for a creditor to secure personal property. While common law systems allow liens to be placed on personal property (such as vehicles) to protect the rights of creditors, there is obviously much more risk that the debtor simply drives away with the collateral if he is fleeing the country.

Assets and Liabilities

Personal property is viewed as an asset. Thus it will likely be considered if you’re applying for a mortgage.
When applying for mortgages or other loans, most lenders ask borrowers to list personal property values on a financial statement. This snapshot gives prospective creditors a proper measure of personal net worth and how firmly a credit applicant is positioned to repay debt. Individuals seeking the extension of credit are asked to assess the fair market value of personal property. Fair market value reflects the price a reasonable buyer is willing to pay for a particular item.
Some personal property assets, such as furniture, clothing, and automobiles, tend to depreciate. Other movable assets, such as collectibles and antiques, often appreciate in value. When assessing creditworthiness, lenders consider the total value of personal property added to real property and financial assets. The total assets are weighed against what an applicant owes to determine risk assumed by the lender in extending credit.

Personal Property and Home Insurance

Homeowners insurance offers three main components: dwelling value, personal liability and personal property value. Policyholders are required to determine the value of all personal property subject to perils. Most homeowners policies ascribe a value to personal property as a percentage of dwelling value. A $200,000 reconstruction value on a home may programmatically extend a 70% value, or $140,000, on personal property. The insured can choose between two options: replacement value of personal property or actual cash value. In the event of a covered claim, an insurance carrier indemnifies the policyholder for replacement of depreciated property with new property or accept the depreciated value of personal property in exchange for a lower premium.

Property Manager

An individual or company responsible for the day-to-day functioning of a piece of real estate. Property owners typically hire property managers when they are unwilling or unable to manage the properties themselves, perhaps because they live out of town, don’t have the time or don’t wish to be hands-on about the investment.
Property managers typically are not required to have any particular educational background or credentials, though knowledge of the property market is a strong asset. In addition to receiving a salary or hourly wage, property managers may receive free or discounted rent if they are living in a building they are managing.
Apartment complexes are a type of property that commonly uses a property manager. The property manager’s responsibilities might include supervising and coordinating building maintenance and work orders, doing light handyman and cleaning work, resolving tenant concerns and complaints, advertising, showing and leasing vacant units, collecting and depositing rent and communicating regularly with the property owner on the status of the property.

Replacement Property

Any property that is received as a replacement for property that was lost as a result of an involuntary conversion, such as theft. Replacement property can be either personal or business property and can include real estate, machinery and equipment, vehicles or personal equipment. Replacement property is often provided for by casualty-insurance carriers.
The value of replacement property can sometimes exceed the value of the property that was lost. In this case, the taxpayer will realize a taxable gain on the difference between the excess value of the replacement property and the adjusted basis of the property that was lost. However, there are rules that allow for deferral of this gain provided certain conditions are met, and the gain can also be excluded if the property is the taxpayer’s personal residence.

Income Property Mortgage

A loan given to an investor to purchase a residential or commercial rental property. Income property mortgages are typically much harder to qualify for and often require a borrower to include estimates of the rental income that will be received from the property. Unlike owner-occupied and single-family residences, there are few government loan programs to assist in the purchase of income properties. This leaves investors at the mercy of private lenders, who themselves are at the mercy of the credit markets.
Owning a rental property is one of the most common real estate goals of individual investors. Accomplishing this goal however, is much harder than the late-night infomercials would make it seem. The biggest hurdle in acquiring rental properties is securing an income property mortgage, which generally requires a larger down payment than the purchase of a primary residence. Typically, an income property mortgage requires a larger down payment relative to personal home mortgages.

Property Tax

Property tax is a tax assessed on real estate. The tax is usually based on the value of the property (including the land) you own and is often assessed by local or municipal governments.
This tax is mainly used by municipalities for repairing roads, building schools and snow removal, or other similar services. Rates of property taxes and the kinds of property considered taxable by the local government vary somewhat in different municipalities and states. As such, when purchasing property in a new state, it is important for individuals and businesses to carefully examine the tax laws of their new locality.
Generally speaking, the value of property taxes is determined by multiplying the property tax rate by the current market value of the property in question, which is periodically recalculated by municipalities.
Almost all property taxes are levied on real property, which is a property that has been legally defined and classified by the state apparatus. This includes land, buildings or other immovable improvements to the land which increase the value of the real estate: for example, an irrigation system on a farm. Personal property – individually owned, movable property – is generally not subject to property taxes, though personal property may have been taxed at the state level upon the initial sale.
Ultimately, property owners are subject to the rates determined by the municipal government. A municipality generally hires a tax assessor (or uses their own), who assesses local property and assigns property taxes to owners based on current fair market values. The payment schedule of property taxes varies by locality, and in almost all local property tax codes, there are mechanisms by which the owner can discuss their tax rate with the assessor, or formally context that rate.
In most OECD countries, immovable property tax represents a low proportion of federal revenue compared to income taxes and value-added taxes, although the rate in the United States is substantially higher than in many European countries. Many empiricists and pundits have called for an increase in property tax rates in developed economies, arguing that the predictability and market-correcting character of the tax encourage both stability and proper development of real estate.

What is Investment Property in turkey

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