Glossary of Terms
An income property is real estate acquired or held primarily to generate rental revenue or other financial returns rather than for owner-occupancy. Common examples include multifamily residential buildings, single-family rentals, retail centers and office space.
Unlike owner-occupied properties, income properties are typically valued using the income approach, which converts anticipated income into a value indication through analysis of net operating income and capitalization rates. The sales comparison approach may also be applied, but rental income potential remains the primary value driver. Lenders underwriting income property loans assess both the property's cash flow and the borrower's ability to manage it.
The classification of a property as income-producing versus owner-occupied has significant consequences — it affects loan programs, required documentation, underwriting ratios and appraisal methodology. Misrepresenting occupancy intent on a loan application is considered mortgage fraud.