Investing in Real Estate

Real estate is real property consisting of the dwellings or buildings on it, and its accompanying natural resources like water, plants or minerals; immovable property, that is, land which is not designed to be rebuilt. Real estate also includes personal real property held for the exclusive use of one person, corporation, business or other entity exclusively. Private real estate is separate from public real estate.

Real estate includes immovable land such as buildings and the fixtures on it, and its accompanying natural resources like water, plants or minerals; residential real estate, such as apartment complexes, townhouses, mobile homes, duplexes, row houses and manufactured homes; and commercial real estate, which is the real property owned by businesses that generate income from its use. Examples of real estate include: land used for growing crops, dairy farms, vineyards, mining real estate, woodlands, golf courses, resorts and hotels, and the areas occupied by strip malls, airports, office buildings and other structures. Real estate does not include intangible personal property such as goodwill or credit that exists in relation to a transaction between a buyer and a seller, including mortgages, easements, franchises, partnerships, and so on. Also included are such intangibles as profits earned by the stock market and foreign exchange trading.

A large portion of real estate market deals involve the purchase of single-family residences. These deals normally center on the construction of homes on previously owned or remodeled land that can be either purchased directly or contracted to another party. Some investors participate in real estate investing through buying single-family residences in neighborhoods that are not typical for their age or type of residence. For example, investors may buy houses in up-and-coming neighborhoods in Florida, New York or California that are a year or two old, with all the potential upside potential. The primary advantage of this strategy is that there are still many people “clinging” to the housing starts seen in Florida, New York or California even after the real estate market has suffered substantial drops.

There are four types of investors who commonly engage in real estate investing: private investors, institutional investors, real estate brokers, and home-based businesses. Of these four types, investors in residential properties seem to follow one of the following strategies. First, they invest in houses that have already been built, sometimes at a lower price than market value, and then resell them to others or themselves to create profit. Second, investors may invest in residential properties that are up for sale, especially at prices that are less than those being offered at current prices. They then fix up the property and sell it at a profit. Finally, some investors rent out their homes and use the extra money from their tenants to finance renovations, creating additional profit.

Private investors include individuals, corporations and other institutions like banks or mutual funds who are primarily concerned with short-term profit. Most of them have a specific area of focus; for example, they may invest in real estate in Miami-Dade County, Florida, or other locations. They are not tied to geographic areas but instead to specific neighborhoods or communities. Because they usually invest on a short-term basis, they have less chance of incurring losses; however, they are more prone to investing in residential and rental properties. Institutions such as mutual funds or banks also engage in real estate investment; although they generally have minimum investments that must be maintained, their total investment is higher.

Real estate brokers handle the purchasing and selling of residential and commercial properties. Although these four main types of investors deal with different kinds of real estate, the principle behind all of their investments is the same-make a profit. For this reason, their advice is invaluable when investing in any kind of property. They know how much each type of property is worth, and can match an investor’s needs to the right property. In addition, brokers receive information about market trends and news that can affect a property’s value.