What is Real Estate?
Real estate is the property, land, buildings, air rights above the land and underground rights below the land. The term real estate means real, physical or property. Real estate consists of land and improvements which include roads, buildings, fixtures, structures and utility systems. Property rights give a title of ownership to the land, improvements and natural resources such as water, animals, plants and any additional mineral deposits.
Types of Real Estate
There are four types of real estate:
- Residential real estate: It consists of both new construction and resale homes for individuals, families or groups of people. The most common category is single-family homes. The structures may be single-family or multi-family dwellings and and may be owner occupied or rental properties. There are also apartments, condominiums, townhouses, co-ops, duplexes, triple-deckers, quadplexes, high-value homes, multi-generational and vacation homes.
- Commercial real estate: It refers to land and buildings that are used by businesses to carry out their operations. It consists of non-residential structures such as office buildings, warehouses and retail buildings. These buildings may be free-standing or in shopping malls.
- Industrial real estate: It consists of manufacturing building and property, as well as warehousing. Industrial real estate refers to land and buildings that are used by industrial business for activities such as research, production, storage and distribution of goods. These properties are usually larger in size and locations may include access to transportation hubs such as harbors and rail lines.
- Land: Land is the baseline for all types of real property. It refers to undeveloped property and vacant land. This includes working farms, ranches and vacant land. The subcategories within vacant land include early development or reuse, subdivision and site assembly.
Some examples of different types of real estate include Single-family dwelling, multi-family dwelling, apartment, attached dwelling, multi-family house, condominium, detached house, villa, mobile home and portable house.
How the Real Estate Industry Works
Real estate also refers to producing, buying and selling real estate. The real estate can be divided into several different areas
- Development: Real estate development is a process that involves the purchase of raw land, construction, rezoning, renovation of buildings, sale or lease of the finished product to end users. Development of new buildings is a component of gross domestic and includes both residential, commercial and industrial buildings. Developers earn profit by adding value to the land.
- Sales and marketing: Sales and marketing firms collaborate with developers to sell the units and buildings they have constructed. Sales is a leading economic indicator and it takes a certain period of time to establish a trend for new houses sold. The firms earn a commission through marketing and the sale of completed units.
- Brokerage: A real estate brokerage is a firm that employs a team of real estate agents known as realtors. They help facilitate a transaction between the buyers and sellers of property. The real estate industry is divided up into specialists that focus on one type of property.
- Property management: Property management firms assist in showing units, collecting rent, performing repairs and managing tenants. They help real estate owners to rent out the units in their buildings.
- Real estate lending: Lenders can include banks, credit unions, private lenders and government institutions.
- Professional services: There are a variety of real estate professionals who work in the industry such as accountants, lawyers, general contractors, construction workers and tradespeople.
Everyone who buys or sells a property engages in real estate investing. Many people prefer investing in real estate as a business venture. It is important to consider all the factors involved in real estate investment. One can invest in real estate directly by buying actual properties or indirectly by buying shares in publicly traded real estate investments trusts (REITs) or mortgage-backed securities (MBS). Real estate offers a steady income, capital appreciation, diversified portfolio and leverage to finance their business. Investing in real estate can be very rewarding and profitable.