Real estate investing is buying and selling property, whether it be a single-family home or a multi-unit apartment building. Investors buy property hoping to profit from the appreciation of the property (Increase in value) over time. Real estate is property comprising the structures on it and the underlying land, with its accompanying natural resources like water, minerals or crops; immovable property of that nature; or an interest in the property itself, buildings or residential housing in general. Most people are familiar with real estate investment and banking but there are other facets of this lucrative market that are less familiar such as:
In the investment and banking sectors of the real estate market, there are four types of residential real estate types: leasehold properties, landlord-occupied residential, business-owner occupied residential and vacant land. There are varying degrees of risk in each type of property. Leasehold properties are those managed by a leasing agent, landlord-occupied residential properties are those managed by a property management company, business-owner occupied properties are those managed by a real estate investment trust or a corporation, and vacant land is those developed without developing any land.
Commercial real estate investment deals more with buildings than residential real estate investment. Here, the major types of commercial real estate include office buildings, retail stores, warehouses, furniture warehouses, auto dealerships, hotels, motels, industrial production centers and shopping centers. The development of commercial property involves more than just purchasing the property and converting it into an establishment. For instance, the purchase of a warehouse involves preparing the location for the building’s erection, acquiring the appropriate permits from the local government, installing electrical wiring, plumbing and other essential amenities, and making sure the building meets the requirements of the state. A retail store is not just an open space or a set of indoor tables-it has inventory and features interior decor that attracts customers and promotes sales.
Unlike residential real estate, the majority of real estate deals involve one of three forms of ownership: common law, limited liability, and corporation. Common law includes the traditional ways in which ownership is transferred in a real estate transaction. It usually involves a deed of trust, a promissory note, a mortgage, or a promise to pay. Limited liability involves the transfer of legal rights to a third party but does not include actual ownership of the property. In a corporation, the main entity involved is the corporation itself, while common law does not associate corporate ownership with any specific person, instead relying on the honesty of the transferor.
Other types of real estate include single-family residences, condominiums, town homes, row homes, manufactured homes, and rental properties. The cost of residential real estate includes financing and interest; taxes and insurance; appraisals and repairs. The financing and interest rates for new homes and manufactured homes are especially attractive to buyers because these homes typically enter into loan contracts after construction. When financing occurs, the lender must be paid first, which can lead to a competitive bidding war among builders. Buyers can reduce the cost of purchasing real estate by selecting homes that are suitable for the area where they plan to live.
Real estate loans and land contracts are terms used to refer to financing arrangements involving land, houses, and manufactured homes and/or modular homes. Manufactured homes refer to homes that have been approved by the Manufactured Home Approval Commission, or MHA, before they are manufactured. Modular homes are apartment style dwellings that are built on pre-existing soil. The economic characteristics of these types of real estate loans and land contracts depend on the total cost of the project, interest rates, time span of repayment, and payback dates. When purchasing real estate, buyers should consider the location, size, and value of the property in relation to the needs and desires of the buyers.