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Understanding Real Estate

Real estate is property made up of land and the buildings on it, as well as the natural resources of the land including uncultivated flora and fauna, farmed crops and livestock, water, and any additional mineral deposits.

What is Real Estate  

Real estate is a tangible asset and a type of real property. Real property examples include land, buildings and other improvements, plus the rights of use and enjoyment of that land and all its improvements. Renters and leaseholders may have the right to inhabit land or buildings that are considered a part of their estate, but these rights themselves are not, strictly speaking, considered real estate.

Real property is not the same thing and should not be confused with personal property. Personal property includes intangible assets like investments, along with tangible assets such as furniture and fixtures like a dishwasher. Also, even renters may claim parts of a home as personal property, provided you bought and installed the property with the lessor’s permission.

When it comes to investing, residential real estate is less expensive and more feasible to individuals, while commercial real estate is more valuable and more stable.

You can invest in real estate directly—buying land or property—or indirectly through buying shares in publicly traded real estate investment trusts (REITs) or mortgage-backed securities (MBS).

Types of Real Estate

“Understanding Real Estate”

Although the media often refers to the “real estate market,” real property examples can be grouped into three broad categories based on its use.

  • Residential real estate: includes undeveloped land, houses, condominiums, and townhouses. The structures may be single-family or multi-family dwellings and may be owner-occupied or rental properties.
  • Commercial real estate: includes nonresidential structures such as office buildings, warehouses, and retail buildings. These buildings may be free-standing or in shopping malls.
  • Industrial real estate: includes factories, business parks, mines, and farms. These properties are usually larger in size and locations may include access to transportation hubs such as rail lines and harbors.

  Benefits of Residential Real Estate and Home Ownership?

“Understanding Real Estate”

Homeownership, also known as owner-occupancy, is the most common type of real estate investment in the United States. According to the National Multifamily Housing Council (NMHC), roughly two-thirds of residents own their homes. Often, these owners have financed the purchase by taking out a mortgage loan, in which the property acts as collateral for the debt.

  Benefits of Commercial Real Estate?

“Understanding Real Estate” 

Commercial real estate is used for commerce and includes anything from strip malls and free-standing restaurants to office buildings and skyscrapers. It is often distinguished from industrial real estate, which is a practical space used in the manufacturing of products.

Buying or leasing real estate for commercial purposes is very different from buying a home or even buying residential real estate. Commercial leases are generally longer than residential leases. Commercial real estate returns are based on their profitability per square foot, unlike structures intended to be private residences.

 

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