Real Estate Investing: The Basics
Real Estate business is highly profitable, and thus it has attracted many people to it. Real estate deals make use of land or real estate as collateral, which is often offered to secure loans. Lending institutions are interested in real estate deals because of its potential for generating income. Most of the real estate deals incorporate the construction and other related improvements to homes. These improvements make homes more marketable and therefore facilitate a better sale or purchase.
There are two main categories of real estate investments residential and commercial. Residential properties are those that are used primarily for living purposes. They include apartments, houses, townhouses, plots, etc., in the form of single family units or multi-family residences. Industrial or commercial properties, on the other hand, are those that are used for specific purposes, such as office buildings, warehouses, hospitals, schools, retail outlets, etc. In both residential and commercial real estate investments, the major categories are land (landlocked & lake side), buildings (housing complexes, office buildings, warehouses, etc.)
The other categories of real estate investments include raw land, easements, improvements to existing buildings, and others. The term "raw land" refers to unproductive land that can be developed into crops or other economic characteristics. The term "improvements to existing buildings" refers to improvements to existing structures like houses and offices, which improve the current property's economic characteristics by adding facilities.
The major types of real estate investments include improvements to man-made properties like buildings, homes, and businesses; natural landscapes; or mineral/gas/oil deposits/ explorations. Man-made structures include bridges, apartment buildings, condominiums, office complexes, warehouses, hotels, motels, private housing, etc. Natural landscapes include forests, deserts, lakes, etc. and man-made ones include roads, pipelines, mines, pipelines, dams, and others. The category "other" refers to all other economic features found within the area.
Within the categories of real estate, there are also sub-categories. For instance, within the category of residential real estate, urban or condominium buildings refer to smaller, less expensive dwellings than traditional apartment buildings. Within the category of industrial real estate, includes manufacturing/office parks, retail and office buildings. Within the category of agricultural real estate, are properties used for farming, cattle ranching, vineyards, golf courses, forests, etc. Within the category of manufactured homes, homes made from manufactured materials like steel, aluminum, plastic, etc.
Real estate investing is a lucrative field; however, it can be quite risky. This is mainly because the price of property used for building houses and structures are not easy to sell at one time. There are also instances where the original cost of the property used for building a house may not have fully recovered by the time of closing. As well, there are instances when the laws governing real estate can change without prior notice. There are many examples include; that the law may change in the favor of the developer, who builds a multi-unit building that is above the ground.
Real estate can also be bought "permanently attached" to the property. Examples include: land that is used exclusively for tennis courts, country clubs, swimming pools, horse properties, etc. Purchasing such properties will be beneficial as the owner retains the rights to use the land and gain income from it in the future.