Have you ever stopped to think what real estate actually means? No shame -- this is a judgment free zone -- here's your chance to get a quick primer. Below is a quick overview of the industry (in the United States); your chance to confirm what you suspected, learn something new, or get your first introduction to how the business works in this country.
Real Estate Defined
Real estate refers to vacant land and land with any permanent structures or improvements on it, as well as the rights associated with the use and ownership of the land. (It gets its name from "real" property). There are different categories of real estate depending on how it is used. (Each state and municipal body regulates and stipulates zoning that determines how properties can or cannot be used). Here are the main three:
Residential real estate refers to property that is used by humans to live. It includes property types such as single-family homes and apartment buildings/condos (multi-family homes). This personal property is what is most commonly thought of, but it is certainly not the only type.
Commercial real estate refers to properties to be used by business for commercial operations (aka no living space on premises). This can include office buildings, shopping centers, and retail stores; both single-tenant and multi-tenant properties.
Industrial real estate refers to a slightly different subset of commercial property, including factories and warehouses.
How it Works
Real estate can be bought, sold, and rented. It can be a valuable asset for both individuals and businesses. The value of real estate is determined by a variety of factors, including location, size, amenities, and market conditions.
The real estate industry includes a wide range of professionals who work in fields such as property management, appraisal, development, and brokerage. These professionals, once obtaining their real estate license, execute real estate transactions to help people and businesses buy, sell, and manage real estate properties.
Real estate agent is one of the most popular professions in the US, with real estate agents specializing in a certain territory or class of property; generally an agent will work on both sides buying and selling property. Each agent will work under the umbrella of a parent real estate brokerage.
Real Estate as an Investment
Investing in real estate can be a way to generate income and build wealth, but it also carries risks and requires a significant amount of capital and knowledge. The real estate market fluctuates with a number of micro and macroeconomic factors. So it is important to do thorough research and seek the advice of professionals before making any real estate investments.
Real estate investment trusts (REITs) exist to add investment property to their portfolios. They undertake a significant amount of due diligence before every real estate transaction. While not every person has the same resources, anyone undertaking real estate investing ought to be extremely careful due to the impact it can have on one's personal finance.
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