Understanding Real Estate

Real estate is simply land plus any property or resources on it. You can also say that it is a class of real property that includes land and anything permanently attached to it, whether natural or man-made.

Moreover, it can include property, land, buildings, air rights above the land, and also underground rights below the land. The term refers to real, or physical, property. But, it differs from personal property, which includes things that are not permanently attached to the land, such as vehicles, furniture, boats, jewelry, and farm equipment.

However, in business, real estate also refers to producing, buying, and selling property. You can invest in real estate directly by purchasing a home, rental property, or other property, or indirectly through a real estate investment trust (REIT). It is often the most valuable investment a person owns. Moreover, it is a critical driving force of the economy. Its value is a key indicator of an economy's health and most household wealth in the United States.

Furthermore, there are several categories of real estate; which are residential, commercial, industrial, raw land, etc. Continue reading to learn more. This article explains what real estate is all about, the main categories, how to invest and how the real estate industry works.

What is Real Estate?

Real estate is property consisting of land and any permanent improvements attached to it, along with its natural and man-made such as water, minerals, trees, buildings, homes, fences, and bridges. However, just as we said earlier, real estate is different from personal property, which is not permanently attached to the land, such as vehicles, jewelry, boats, furniture, etc. Real property shouldn't be confused with personal property. The basic characteristic of personal properties is that it's movable. A further explanation of real property is found below.

For better understanding, real estate is often referred to as real or physical property. It consists of land and any other tangible improvement that might be attached to it. Improvement can be a building that's been erected on the land. The land is said to be improved with any of these structures, and unimproved when it lacks them.

Moreover, terms like land, real estate, and real property are sometimes, used interchangeably. But there are some slight differences between them. Land refers to the earth's surface and airspace above, including the trees, minerals, and water. Whereas, real estate is the land (including the trees, minerals, and water) and any permanent man-made improvements, such as houses and other structures on it. Then, real property refers to one of the two main classifications of property. It is the benefits, interests, and rights innate in the ownership of the real estate.

How Does Real Estate Industry Work?

Of course, real estate doesn't simply exist. Many people tend to think the industry consists merely of brokers and salespeople. But in fact, millions of people earn a living through the industry. It involves numerous aspects, not only the sales that make up the industry.

However, there are also appraisals, property management, financing, construction, development, counseling, and several other fields. Moreover, many other businesses and professionals such as accountants, architects, banks, insurance companies, lawyers, surveyors, etc. also depend on the real estate industry to earn a living.

Moreover, just as we said earlier, real estate is a driving force in the economy's health. While real estate can be purchased or sold, improved or unimproved, owned by a government, private, or corporate entity. There are certain components of real estate that can have a direct impact on the economy. This includes consistent improvement of land, individuals, and entities that enable the transfer of ownership.

Real Estate Agents

A real estate agent is a licensed professional who arranges real estate transactions, putting buyers and sellers together and acting as their representatives in negotiations. They assist individuals, businesses, and investors in buying and selling properties.

However, a real estate agent's role differs depending on the side they represent. Agents working with the seller are called the listing agents. They are contacted by the owners of the property to assist in marketing it for sale or lease. Moreover, listing agents help find buyers through Multiple Listing Service or their professional contacts.

Furthermore, they price your property using comparables, otherwise known as comps (listings of recently sold properties that are similar to yours). The buyer's agent, on the other hand, provides similar services for the property buyer. They can find a property that suits your needs as they are familiar with the local market. Moreover, they also do comps (compare prices). This process helps them find properties in areas that are affordable.

Types of Real Estates

There are five main categories of real estate:

Residential Real Estate

This includes any property used for residential purposes. Such as single-family homes, condos, duplexes, townhouses, and multifamily residences with fewer than five individual units.

Commercial

These are properties that are used exclusively for business purposes. This includes shopping centers and strip malls, medical buildings, educational buildings, hotels, and offices. However, apartment buildings are often considered commercial because they are owned to produce income, although they are used for residences.

Industrial

These include any property that is used for manufacturing, production, distribution, storage, and research and development. It includes manufacturing buildings and property, as well as warehouses. However, some buildings that distribute goods are also considered to be commercial real estate.

Raw Land

Land includes vacant lots, working farms, and ranches. The subcategories within vacant land include undeveloped, early development or reuse, subdivision, and site assembly.

Special Purpose

This category consists of properties used by the public, such as cemeteries, government buildings, libraries, parks, places of worship, and schools.

How to Invest in Real Estate

Real estate investment involves engaging in buying or selling real properties. There are several ways to invest in real estate. However, some of the most common ways to invest directly include: homeownership, rental properties, and house flipping.

You can choose to buy and sell properties as a business by investing in homes. Then, you might want to flip a house, by buying it to improve it and then sell it. Moreover, you can also own several homes and rent them out. However, real estate, unlike other investments, is affected by its location. There are actually factors that can drive real property prices up or down. They are crime rates, employment rates, transportation facilities, local economy, school quality, etc.

On the other hand, you can invest indirectly without buying a home, instead, you buy stocks of homebuilders. However, the stock prices rise and fall with the housing market. Another popular way to invest indirectly is through a real estate investment trust (REIT); a company that holds a portfolio of income-producing real property.

Final Thoughts

In conclusion, real estate is now regarded as one of the most lucrative and fast-growing businesses in the world. There are so many careers in the real estate industry. However, you can start a real estate business either as an investor or as an agent, and you can start making a lot of money within a short period of time. All you need to do is to follow the right strategies by making research and benefit from the wisdom of other agents and investors made from their successes and mistakes.