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What are Capital Investment Properties?

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  • Written By: Jeremy Laukkonen
  • Edited By: Allegra J. Lingo
  • Last Modified Date: 24 February 2017
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Capital investment is the use of money to purchase various fixed assets, such as real estate or the equipment necessary to operate a business. It typically refers to things that are purchased to be used, rather than to be relied upon for an income or quickly resold. Capital investment property is typically real estate that will often be used by a business in the course of its operations. Some common capital investment properties that a business might acquire include office buildings, distribution facilities, warehouses, or factories. An income can be earned from capital investment properties in some cases, though any such rent receipts are typically secondary to the main use of the land.

Many businesses may require a physical location to operate from. Some may choose to lease space, while others will acquire one or more capital investment properties to occupy. The physical use of the real estate in the course of doing business is typically the primary reason for the purchase, but there are some cases where a capital investment property can yield other income. These kinds of real estate purchases may sometimes provide financial gains in the long run if they are eventually resold, or in the short term through rent receipts if there is extra space.

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Sometimes a business may acquire capital investment properties that have a larger capacity than is required by the current operations. This could be an office building with a vacant floor, or a distribution facility that is only partially used. In cases like these, the excess space in the capital investment properties may be leased out to provide income. Establishing rent rolls may also help when selling the property in the future, or if a loan must be secured to provide further operating capital. Even though the income from leasing real estate is not typically the purpose of capital investment properties, it may be a side benefit.

Businesses or individuals may also engage in real estate speculation, though this buying and selling of real property for profit may not fall under the definition of capital investment. Capital investments are usually held long term and not purchased with the intent of selling, though there are cases when they may be sold. If a business requires operating capital, it may consider selling excess real estate holdings. Another common reason for selling a capital investment property is to free up the funds to purchase different real estate that would better suit the current business operations.

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