What is Real Estate? Learn Definitions, Functions, and Investment Opportunities
Uro? Djakovi?
Empowering Real Estate investors to deliver exceptional Residential Projects in SEE
In This Article
Definition of Real Estate:
Real estate?refers to real, or physical, property, and can include land, buildings, air rights above the land, and underground rights below the land. As a business term, real estate also refers to producing, buying, and selling property.
Key Points:
How Real Estate Functions:
Real estate plays a pivotal role in the Economy, serving as a catalyst for economic growth. It can be viewed as an investment or a purchase to fulfill the needs of individuals or businesses.
Real estate, often referred to as "real property," encompasses land and any tangible improvements on or in it. These improvements can be buildings, roads, or other structures. Land with such enhancements is considered "improved," while land lacking these improvements is classified as "unimproved."
Real estate encompasses various aspects, ranging from transitioning from unimproved to improved status, buying and selling properties, and ownership by governmental, corporate, or private entities. Certain factors, such as consistent land improvement and the facilitation of ownership transfers, directly impact the economy.
Note: Historically, voting rights in the United States were initially restricted to real estate owners.
Types of Real Estate:
Real estate can be categorized into four main types:
This includes newly constructed and resale homes. Single-family homes are the most common type, but there are also options like condominiums, co-ops, townhouses, duplexes, triple-deckers, quadplexes, high-value homes, multi-generational homes, and vacation homes.
Commercial properties encompass shopping centers, strip malls, medical buildings, educational buildings, hotels, and offices. Apartment buildings are considered commercial properties due to their income-generating nature, even though they serve as residences.
Industrial real estate consists of manufacturing buildings, warehouses, and research facilities. Some buildings involved in goods distribution are also classified as commercial real estate. This category's unique classification affects zoning, construction regulations, and sales practices.
Vacant land includes undeveloped lots, working farms, ranch
领英推荐
Construction of New Buildings:
Examining new home construction is vital when evaluating real estate and its impact on the economy. This category encompasses the construction of single-family homes, townhouses, and condominiums. Around the world we see Real Estate Developers creating large-scale projects for living and investment. It's important to understand the sales process of this kind of project, and for the Real Estate Developers to learn how to use the Internet to their strengths, to use digital tools, etc. More information about digitizing this process can be seen on this LinkedIn page
Real Estate Agents:
Real estate agents play a crucial role in facilitating property transactions for individuals, businesses, and investors. The industry is often divided into specialized areas.
Listing agents assist sellers in finding buyers through platforms like the Multiple Listing Service and their professional networks. They determine the property's price by analyzing recently sold homes, commonly known as "comparables" or "comps." Listing agents can also provide guidance on enhancing the property's appeal to potential buyers and negotiate to achieve the highest possible price.
Buyers' agents offer similar services but cater to home purchasers. They possess local market knowledge and help buyers find properties that meet their specific criteria. By conducting price comparisons or "comps," buyers' agents identify affordable areas. Additionally, they negotiate on behalf of buyers, present reasons for lower prices to sellers, and provide assistance with legalities such as title searches, inspections, and financing.
Note: Real estate agents who aspire to enhance their professionalism can become REALTORS.?
Understanding Real Estate Market Numbers and Data
Statistics about new home construction are important?leading economic indicators. They can give you a heads-up on the future of the housing market. The Census Bureau?reports on new housing starts and completions monthly.
Each of these?indicators?tells a slightly different story about the health of the homebuilding industry. For example, it would take a toll on home sales if home sales were steady, but housing starts were to decline. Many buyers might not want to wait longer than a year for a home to be built. Slower housing starts could also mean that there's a shortage of lumber, concrete, or construction workers. Those shortages could drive up costs and sales prices.
If mortgages decline, the homebuilder will end up with an inventory of unsold homes for sale. Perhaps demand is high, but homeowners can't get mortgages. Rising home starts might seem like an indicator of housing strength, but declining?home closings?mean the housing market is weak.?
Three other indicators are important to watch:
The Census Bureau reports new home sales prices, but the National Association of?Realtors?provides monthly reports on the number of homes resold and their?average price.45?Resale data can provide a better indicator of the health of the overall housing industry than new home construction because new home builders can be overenthusiastic about future sales. Overzealous homebuilders can overbuild or cut prices to encourage sales.
Investing in Real Estate
Anyone who buys or sells a home engages in?real estate investing, and this means considering several factors. Will?the house?rise in value while you live in it? How will future?interest rates and taxes affect?you if you get a mortgage????
Some people do so well investing in their own homes that they want?to buy and sell homes as a business. You might flip a house by buying it, improving it, and then selling it. Many people own several homes and?rent them out. Others?use Airbnb or a similar service as a convenient way to rent out all or part of their homes.
Note: Make sure you know where we are in the?current business cycle?before you invest.
You can also invest in housing without buying a home. You can buy stocks of homebuilders. Their?stock prices rise and fall with the housing market. Another investing strategy involves?real estate investment trusts?(REITs). These real estate funds pool investor contributions and let fund managers invest those contributions in real estate. The investors collectively own the property, whether it's residential, commercial, or anything else. As real estate investments, REITs are covered by some regulations that don't affect typical corporate equity funds, including a legal obligation to pass at least 90% of profits through to investors.6