 |
| Ariel Architectural View at the Lazy Artist Gallery |
Real estate is one of the most common and diverse industries globally. The real estate market is currently exploding reaching 65.8% by 2020 and many people still invest their money in land and buildings.
If you are dealing in real estate or are interested in investing in real estate it is helpful to break down the different types of properties to make your choice easier. So in today's article we're going to talk about what real estate is and take a deep dive into the four types of real estate.
types of real estate.
Table of Contents:
- Introduction: What exactly is real estate?
- Why real estate is unique and diverse
- Properties used for residential purposes
- Commercial real estate brings stable high income
- Raw Land: most secure, least expensive
- Industrial real estate is not commercial real estate
- Conclusion
Introduction: What exactly is real estate?
In simple terms real estate consists of two parts: the land and each element attached to that land.
These elements or assets include natural resources (water-based constituent mineral plants) and real property improvements made on land such as buildings or houses.
This land and other assets can be used for a myriad of purposes and this is where real estate types come into play.
➡️Offering people a home to live in
➡️Utilization of land for farming
➡️Commercial property for businesses
In the investment world the term "real" refers to the original land buildings or structures and other personal property used as security or collateral.
There are countless ways to invest in real estate which can confuse even the most informed investors. We have brokerage real estate agents and even real estate developers who facilitate the transaction of this income-producing property.
Understanding the different types of real estate is a great place to start and in this blog we'll take a closer look at all four.
Why Real Estate is Unique and Diverse
Let's take a quick look at the economic and physical attributes of real estate that give it a unique status and make it the most reliable way to create wealth.
➡️Real estate is in a "fixed supply" state. There is a limited number of buildings that can be built on a piece of land.
➡️Each piece of land or structure is completely different from each other
➡️Improvements to land can increase its value and help generate more income
➡️It is marked by immovability. While improvements can be made to the land itself the construction of sidewalks street water and sewer systems cannot be tampered with.
➡️It is perennial except for erosion that causes land damage.
➡️Location greatly affects the value of real estate. Homebuyers invest in real estate factors in neighborhoods with good job growth in population school districts.
There are various options for real estate. This brings us to the four types of real estate and the potential benefits each has to offer.
➡️Residential Real Estate
➡️Commercial Real Estate
➡️Industrial Real Estate
➡️Land
Aerial photo of buildings and roads by Aleksejs Bergmanis
Properties Used for Residential Purposes
World Real Estate Magazine explains how the residential real estate market has grown over the years to reach a value of $33.6 trillion in 2021. This is said to be much higher than the annual GDP of China and the United States combined.
Residential real estate is one of the highest income real estate types and includes single-family and multi-family homes villas condos townhouses co-ops and more. Residential properties or homes for sale have distinctive features.
➡️Residential properties include resale of existing homes and new builds.
➡️Because of the low cost of entry it is much easier to obtain financing for them than commercial real estate.
➡️A down payment of 3% to 10% of the structure purchase price is considered sufficient to buy it. This makes it a viable investment option.
➡️Investing in residential real estate comes in many forms
➡️Few property owners opt for short-term investment and profit by renovating and flipping properties
➡️Long-term investment is another option i.e buying a home for cash flow and using it as a rental property
Brown wooden house in front of swimming pool under blue sky by Chris Goodwin
Commercial real estate brings stable high income
One of the types of real estate is commercial real estate. The commercial real estate market is estimated to be half the size of the residential real estate market in 2019. Alexandra Thompson estimates it to be between $14 and $17 trillion.
The reason for this difference is that while we all need a home not everyone needs commercial real estate.
Commercial real estate includes restaurants hospitals schools shopping centers etc. Here are some interesting properties of commercial real estate.
➡️This type of real estate is of a long-term lease nature. It allows commercial property owners to demand more rent thus providing more stability and higher income.
➡️Commercial properties require a high down payment almost 20% of the purchase price and the cost of managing the property is much higher.
➡️Reit (Real Estate Investment Trust) and crowdfunding allow homebuyers to invest with a low down payment.
➡️Every commercial property is rented and managed in a different way. Even the pricing of this type of real estate is highly dependent on the income it generates.
Black and White Commercial Building (Pixabay)
Raw Land: Most Secure, Least Expensive
Raw land is an open space without any buildings or improvements. This is an undeveloped property that offers more flexibility in using the land.
➡️Vacant land is one of the cheapest types of real estate and buying it is a popular long-term strategy.
➡️Land for sale has minimal maintenance costs.
➡️It is usually purchased for natural resources or rights to future development.
➡️Farm Pasture Pasture Orchard Recreational plot Planned urban development falls under the category of undeveloped land.
➡️Investing in vacant land requires significant capital and a thorough understanding of real estate including zoning regulations floodplains and more.
Industrial real estate is not commercial real estate
Even if industrial property is used for commercial purposes it is considered a distinct type of real estate. The use of such property is very specific including land transactions for the manufacture of commodities.
➡️Industrial real estate includes storage facilities production houses warehouses for solar power plants etc.
➡️It is often located in remote locations to ensure that people are not exposed to pollutants and chemicals created during the manufacturing process.
➡️Estimating capital investment is tricky as it all depends on the nature purpose and location of the property where it was purchased.
Conclusion
In fact there are several potential benefits when it comes to different types of real estate. They all have their own advantages and disadvantages.
Property developers play an integral role in creating value for different types of properties. They build new attractive structures renovate existing structures and use a variety of techniques and processes to improve real estate sales.
All in all the U.S economy has been significantly influenced by real estate and has indisputably grown exponentially over the past few years.
If you're a business considering selling or developing real estate 3D rendering can simplify your process and allow buyers and investors to sit back and listen. BluEntCAD provides 3D rendering services for home builders real estate developers architects interior designers design-build contractors and remodelers for large and medium-sized projects.
Ready to grow your business with 3D rendering services? Contact us now!
Maximum Value. Achieved.
Comments
Post a Comment