Real Estate

Real Estate: overview

The real estate industry is one of the oldest and diversified industries in the world. Over the years, the Industry sector has grown quite considerably having become more prominent as a result of the expansion of the global economy. It makes major contributions to the economic development of countries as it provides employment and works with many other already existing industries. The demand for real -state is also a result of growth in population, level of income, and access to capital. One of its key features is that it is dynamic as a result of national and local economies and this is influenced by external factors which include; demographic changes, urbanization, changes in sustainability and advancements of technology. Home Modifications (2021) : Your Best Guide To Aging In Place

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What is real estate?

Its is defined as property, land, buildings and air rights above land and underground rights below the land. It is also referred to as real- estate property. It covers land and any form of improvement that may be done to it, rested on it or installed in it. Land and improvements are the main components of real estate. It is essential that one understands the working, types and opportunities of the industry before investing as this makes the process of investment much easier.

How real estate works

Essentially, real estate operates by involving various parties. There are developers who make the purchase of raw land, construct the new buildings and then re-sell or lease the property to tenants. There are also sales and marketing firms that handle the sale of the projects that have been developed. It also involves the broker firms that employ licensed agents that help people who want to invest in buying, selling and renting of property. The daily operations of the rental property are handled by companies that deal with property management. Also involved are the real-estate lenders who provide the finances that go into the acquisition of the property such as national bankers, credit unions and mortgage brokers. The operation of the industry also involves professional service providers such as financial advisors, attorneys and accountants.

Different types of real estate

Although the industry is wide, there are primarily four types of real estate that are universally recognized. Understanding the types can help in knowing the asset class within which the real estate falls hence help in making proper investment decisions.

1. Residential real estate

This is the most common and it includes housing for individual persons, families or groups of people. They can either newly constructed houses or resale homes. The living arrangements in this type of real estate are:

  • apartments
  • single-family homes
  • townhouses
  • mobile houses
  • condominiums
  • duplexes and triplex houses
  • vacation homes
  • high-value homes

2. Industrial real estate

    This type of real estate includes warehouses, manufacturing buildings and property. The property in this category is the main use for purposes such as mechanical production, research and development, storage, and the transportation and distribution of goods. Unlike commercial real estate, industrial estate has its own distinguishing features that make it a class of its own. Some of the facilities in industrial real-estate include:

    • freezer and refrigerated storage facilities
    • food processing centers
    • research and development parks
    • energy production stations such as power plants and solar generating stations
    • centers of storage and distribution
    • Data server centers for companies such as Google.

    This classification is of importance because it enables different handling of zoning, construction and sales of the property in this industry.

    3. Commercial real estate

    This type of real estate includes amenities such as medical and educational buildings, shopping centers, strip malls, hotels and offices. This is the main use for business purposes which include:

    • Mobile home parks
    • Apartment buildings
    • Retail spaces such as outlets for fast foods
    • Office space such as office parks and office towers
    • Self-storage facilities
    • Leisure and hospitality amenities
    • Gas stations and grocery stores

    4. Land

    In this type of real estate, raw or vacant land is purchased for development in the future and for gaining rights to resources such as water, mineral and air in the urban areas.

    Land covers areas such as:

    • Parcels for recreation and leisure purposes such as fishing
    • Raw land that is undevelope
    • Farms and ranches
    • Orchards
    • Timberland
    • Planned urban development
    • Lots in a land subdivision

    Important considerations for real estate investment

    Before investing in real-estate property, there are some key factors that one needs to consider to ensure that the investment is worthwhile and the right one for you. Some of these are highlight below:

    1. Location

    A properly located land property is more profitable than one that does not have a strategic location. One should look at the long-term development potential of the area to predict the market trends of real-estate. Another consideration of the location is the intended use of the surrounding areas. Having close proximity to amenities and transport systems is an added advantage especially for residential real-estate. Home Modifications (2021) : Your Best Guide To Aging In Place

    2. Purpose of investment and investment horizon

    Real estate industry has a low rate of liquidity and high value investment. So the investor should consider if the property is for self-use, leasing, short-term selling or long-term selling.

    3. Value of the property

    It is important that the investor asks themselves questions such. As how much will incur during purchasing the property? How costly is insurance? What amount goes to taxes? Other costs to consider are the cost of land and construction and comparable sales of other properties of similar features.

    4. Expected cash flow and profitability

    It is important to consider how much money is left after expenses and having a positive cash flow is an indication of a good return on the investment property.

    Parting shot

    Investing in real-estate markets is a lucrative investment opportunity if done after proper assessment of the market and the potential presented. Understanding what type of real estate the property belongs to and working with certified professional people will save you money and guide you to making the best investment decision. Home Modifications (2021) : Your Best Guide To Aging In Place


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