No doubt you’ve heard the term “investment property” being mentioned or seen such line items on balance sheet’s of other companies. But what is investment property? Should you have investment property on your balance sheet?

In a nutshell an investment property is property you’re not using in your own business, that’s for one. You’re not using it for your own production, office or whatever similar activities, but rather for renting it out or you’re holding it for future profits (gain in fair value of the property). 

If this “property” is partly used for one purpose, i.e. you use it for your own office or production and the other you rent out, you should show part as your property, plant and equipment and part as investment property.

It’s not so much as a different accounting method or classification – they are both still non-current assets and depending on your accounting framework the accounting treatment may very well also be the same, but just reflecting your assets correctly. By definition PPE is what you use in your business – they are the ones helping you in generating operating profits, but investment property is what helps you in getting non-operating results and aren’t this predictable if you think about the concept. One is stable business and the other rather one-off.