An investment property is a property purchased specifically to generate profit through rental income, capital gains, or resale. As a legal concept, investment property appears in securities law and business law.
Under the Uniform Commercial Code Article 9, which deals with secured transactions, an investment property can be a certificated or uncertificated security, security entitlement, securities account, commodity contract, or commodity account. The UCC does not consider investment property to be an account.
Investment property can be used as collateral in secured transactions. For a lender to take a security interest in investment property, they must describe the investment property as collateral in the granting clause of the security agreement through use of the UCC terms or description of the underlying assets making up the investment property.
To perfect a security interest in investment property, a lender should either file with the relevant office or take control of the investment property. For example, New York law allows for filing or control of the collateral to perfect the security interest.
[Last updated in June of 2023 by the Wex Definitions Team]