Understanding Real Estate
Real estate is property comprising of the actual buildings and land on it, together with its accompanying natural resources like water, minerals or plants; and its accompanying personal properties like cash, shares, deeds, etc. immovable land of this kind; buildings; house, apartment or condominiums. The word ‘real estate’ is derived from the French term real, meaning ‘existing reality’. In United States, ‘real estate’ is used in a broader sense, to include not only the tangible constructions that occur on a piece of real estate, but also the underlying assets and liabilities that go with it (house, land, etc.). This broader sense of ‘real estate’ is what the term ‘real estate investment’ is based on.
Real estate investment refers to those processes undertaken to make profit by buying, possessing and permanently attaching residential or commercial real property, sometimes together with other immovable properties, making them ‘permanent fixtures’ on your land. These properties may be bought for use as a home or for investment. Residential properties are used mainly as a means of home or paying home mortgage payments. Commercial real estate is used mainly for renting office space or doing business, and includes warehouses, apartments, retail shops, and industrial production facilities. Permanent fixtures include office buildings, hospitals, restaurants, motels, shopping malls, and hotels.
The main types of real estate investments are: single-family residential property, multi-family residential property with shared ownership, commercial real estate, land ownership, partnership ownership, land trust, foreclosure properties, and vacant land. There are many more main types of real estate properties available today than were there even a few years ago. But whatever type of real estate you choose, whether residential or commercial, remember that it is a process. And the process has many factors to consider, such as the location of the property, accessibility of the property, the cost of financing the real estate purchase, the quality of the surrounding community, the reliability of the local government, and many others.
Many investors have bought property “sole proprietor” without having any intention of ever using it, either as a residence or for investment purposes. While the “sole proprietor” may reap some tax benefits from the sale, such as no capital gains taxes to be paid on the gain, the investor must also consider the tax implications of permanently attaching the property to the building. For example, if the owner decides to sell the property at some point in the future, will the value decrease or increase? And if the value does increase, does the new sale price include any depreciation that the new purchaser will have to pay? There are also implications for maintenance costs, including regular inspections of the building by the local government and insurance companies. And how do you keep track of all the many details of the many kinds of real property transactions and investments?
Single-family residential buildings fall into one of the three main categories of Real Estate: single-family homes, condominiums and townhouses. These categories are usually referred to as residential properties. Other types of Real Estate include commercial real estate (also called office real estate) which includes office buildings, apartment buildings, warehouses, retail stores, and other types of buildings used for business. Industrial real estate deals with the sale and rent to own of agricultural and industrial real property (e.g., barns, grain elevators, etc.). Industrial real estate also includes land used for such things as parking lots, school buildings, hospitals, and other types of buildings considered to be necessary for business.
In summary, for many people, the Real Estate market includes both residential and non-residential Real Estate. This includes both vacant land (land that does not yet have any houses on it) and non-conforming parcels (land that has been built up and does not conform to the zoning ordinance). Many people buy property and then lease it out, sometimes continuing to live in it when they sell their home. Whatever your interest in Real Estate, you should be sure to check out the resources below to learn more about it.