What is real estate: definition, types, and investing

Intro

“Real estate cannot be lost or stolen, nor can it be carried away. Purchased with common sense, paid for in full, and managed with reasonable care, it is about the safest investment in the world.” – Franklin D. Roosevelt. The former president of America was right decades ago. According to Research&Markets, the global real estate market reached a value of US$ 6,883 billion in 2021. Looking forward, the market is projected to reach a value of US$ 7,806 billion by 2027, exhibiting a CAGR of 1.90% during 2022-2027.

Whether you are interested in buying or selling real estate, want to invest in it, or are just captivated by this field of activity, here you will find the answers required. We will not only tell you about real estate’s meaning and the main types of real estate property but will help you understand all the nuances that you need to know about before investing.

What does real estate mean?

Real estate definition

There are many real estate definitions. Generally, real estate is property consisting of land and buildings located on it, as well as natural resources, including wild flora and fauna, crops and livestock, water, and any mineral deposits. Also, under the concept of real estate is considered the property of a legal or natural person that cannot be moved in space without causing some damage. Thus, real estate is different from personal property, which is things that are not attached to land: cars, boats, jewelry, furniture, and farm equipment.

The housing industry itself is divided into four different types of real estate: residential, commercial, industrial, and vacant land. Real estate objects can be used both to live and register at the address and for receiving passive income through doing business. Often, the right to property and its operation is determined by local authorities and ordinances where it is located (in the US, the laws of each state). Acquisition, ownership, and transfer of real estate can be carried out through individuals, commercial and non-commercial corporations, legal entities, and so on following the law. Land or real property that no one owns is not considered real estate.

Economic and physical characteristics of real estate

• You can invest in it
• Can be improved or not improved
• Can be bought, sold, or rented
• It may be owned by individuals, the government, or companies.

A real estate is a common form of financial investment. A real estate investor can put his money directly by purchasing a property, such as an apartment, a retail store, or a vacant lot, or through REITs, real estate mutual funds, and exchange-traded funds.

Land and property can provide stable income and financial stability to those who own them. They can also increase in value, raising his income. Since buying a property often involves a significant expense, many people take out a loan that allows them to cover their expenses and then pay it off gradually over several years. When buying a house, this loan is called a mortgage; commercial and industrial real estate requires a personal or business loan.

Real estate investments are often the most valuable and have particular benefits and risks. In general, the value of a real estate can be a key indicator and an important factor in the growth of the country’s economy.

Real estate examples

• Single-family home
• Apartment
• Condo
• Townhouse
• Villa
• Duplex
• Multi-family house
• Cooperative
• Portable house
• Hut
• Mobile home
• Office
• Shopping mall
• Medical center
• Gas station
• Production facility
• Data server center, etc.

Types of real estate

Let’s start at the beginning and remember some facts. There are several types of property: private and public property, tangible and intangible, movable and immovable, and personal and immovable properties. Real estate is one of the most popular and profitable property types. It is also divided into different categories.

Homes, residential lots, vacant land, outbuildings, commercial buildings, decks, sewers, and even trees and lights within lot boundaries – all these are examples of real estate. Let’s take a closer look at all types of real estate and their main differences and features.

1. Residential

What is residential real estate? Residential real estate is an object in which private individuals can live. Residential real estate covers elements of common property, including land and objects existing on it, such as water resources, trees, minerals, buildings, fences, bridges, etc. Such property can be inhabited by one or more families, and be wholly owned or rented for a certain period.

Residential real estate includes both new buildings and secondary homes. Single-family houses are the most popular residential real estate example and the most common dwelling category. There are also condominiums, co-ops, townhouses, duplexes, three-story houses, four-story apartments, luxury mansions, and vacation homes. Condominiums, detached houses, and apartment buildings are the main 3 types of residential real estate.

Residential property is often a person’s most valuable financial asset, and the value of the real estate on a property is subject to market fluctuations. According to the World Property Journal, the total value of the housing market in 2020 reached $33.6 trillion. Some people buy property in the hope of making a profit from it, either by selling it for a profit or renting it out to others for a fee. The housing market in the US is growing every day, thanks to successful investments in this type of property. 

Important characteristics to consider when buying a home include

• House location
• Plot size
• Age, style, and condition of household appliances
• Price
• Age and condition of the house.

Here are the top services to find residential real estate: Zillow, realestate.com, realtor.com, Trulia, and homes.com. You can use them or find it on your own.

2. Commercial

Commercial real estate is non-residential premises used for commercial purposes, such as office buildings, restaurants, shopping malls, hotels, hospitals, cinemas, etc. The lease term here is usually shorter than in the case of residential real estate. Apartment buildings also often fall under the commercial real estate category.

Commercial real estate can be conventionally divided into the following types:

• Real estate for retail trade
• Business centers
• Public catering facilities
• Warehouses for storage and sorting
• Industrial property
• The hotel and health sector
• Service Industries
• Gas stations, service stations, garages, car washes
• Theaters and cinemas, etc.

Although many entrepreneurs conduct their business through the Internet, the demand for commercial real estate remains very high. The choice of object largely depends on the purposes for which it is bought. For example, in residential areas, commercial real estate is mainly for opening shops, pharmacies, beauty salons, etc. If we are talking about an office, the best choice for office space is the city center and business districts.

Investments in commercial real estate were and remain among the most reliable and profitable. According to IBISWorld commercial real estate in the US Market Size in 2022 is $1.2 trillion.

If you are looking for commercial real estate, we recommend you use CBRE, LoopNET, Crexi, CommercialSearch platforms, or JLL to get real estate services.

3. Industrial

Industrial real estate is property used for production, processing, storage, and distribution. This is a separate type of property, although it is also used for commercial purposes. Factories, warehouses, manufacturing facilities, research centers, and solar generating stations are examples of industrial real estate. These facilities tend to be much larger and may have access to transport hubs such as rail lines and harbors. They are also often located away from the public so as not to harm others (for example, from the release of chemicals that have arisen during the production process). Such objects are bought for specific purposes, so it is quite difficult to evaluate the investment in it. Although the industrial property is often classified as commercial, it is a different type of real estate.

Among the best services for industrial real estate search are CBRE, LoopNET, Showcase.com, and Crexi.

4. Vacant land

Among the types of property in real estate, it is the most interesting one. The definition of land in real estate means undeveloped property, and vacant and reclaimed lots. In other words, it is free land that does not have any buildings or improvements. It can be ranches, farms, orchards, and forest lands.

Free land is one of the cheapest types of real estate. Taxes and costs for maintenance and upkeep of vacant land are usually much less than for residential or commercial properties. That is why such investments are a good long-term strategy. Some entrepreneurs buy land and combine it with other real estate and rebuild it for future development and natural resource rights. In America, land investments are popular in states such as Arizona and Texas, as well as Florida and Tennessee.

Physical characteristics of land include uniqueness, indestructibility, and immobility. It also has some distinct economic characteristics that affect its value as an investment:

• Deficit. Although the land is not considered rare, the total supply is fixed.
• Improvement. Any additions or changes to the land or building that affect the value of the property are called improvements. Improvements of private nature (such as houses and fences) are called improvements on the land. Improvements of a public nature (such as sidewalks and sewer systems) are called land improvements.
• Persistence of investments. Once the land is improved, the total capital and labor used to construct the improvements represent a significant permanent investment. Although the building can be demolished, improvements such as power, water, and sewer are generally permanent because they cannot be removed (or replaced) economically.
• Place or local preference. Location is one of the most important economic characteristics of the land. Factors such as convenience, reputation, popularity, and history of a property’s location influence people’s choice to purchase or invest in it.

Best sources for finding vacant land include LandWatch, Lands of America, Land.com, LandandFarm.com, AFM Real Estate, Land And Farm, or LoopNet.

5. Special Use real estate

Special use facilities are properties used by the public, such as cemeteries, churches, shelters for the elderly, government buildings, libraries, parks, places of worship, car washes, schools, and so on.

How does real estate work?

The real estate market consists of all properties available for sale in a particular area. The housing market is a segment of the real estate industry that includes only residential property. Economic factors can cause an increase or decrease in the value of real estate on the market.

Since the value of real estate tends to rise over time, investors can often make a profit by buying and selling it. A real estate business buys, sells, manages, or invests in properties.

Here is how the real estate industry work:

1. Property management. Property management companies help landlords rent out their homes. They show apartments, collect rent, do repairs and serve tenants.

2. Development. Developers buy undeveloped land, zoning, building, and renovating constructions to sell or rent the finished product to end users. Also, developers make a profit by improving real estate.

3. Lending. Commercial banks and special government agencies from which developers borrow money to finance business and construction projects.

4. Sales and marketing. Companies from this area are teaming up with developers to sell properties through hired agents. They also create marketing materials and receive commissions for their work.

5. Professional services in the industry, such as accountants, lawyers, and architects who run the real estate industry.

6. Brokerage services. Real estate brokerage firms hire real estate agents to assist buyers and sellers in the appropriate transactions.

Thus, the real estate industry is a huge field of activity where a large number of specialists are involved. Brokers and agents are those who rent and sell real estate. Developers buy land, build properties on it, and then sell it to interested parties. Before a property can be sold, its value must be determined by an appraiser. Support staff, office managers, attorneys, loan officers, and others are also important participants in every real estate transaction.

Real estate agents

An important link in any work with real estate is a real estate agent. It is a professional who buys, sells, or exchanges real estate. Solve the problems of clients, selects the necessary object, study the supply and demand in the labor market, look for buyers or sellers of the property, and conclude contracts. The agent acts as an intermediary between the seller and the buyer of real estate (landlord and tenant).

The agent not only brings the parties together but also undertakes the entire process of supporting the operation from finding suitable premises to the official conclusion of the contract. If the client does not have time for an independent selection of housing, he voices his wishes to the agent, who offers the customer a choice of several options. A real estate specialist checks compliance with the necessary documentation, the integrity of the seller and the buyer, runs through the authorities, etc. His duties are spelled out in the contract between the agency and the client.

People will always need housing and places to work, and it is real estate professionals who will help them find homes, commercial premises, and other real estate.

3D rendering for real estate marketing

Real estate 3D visualization is a powerful marketing tool that allows real estate agents and companies to attract new customers and significantly increase sales.

Previously, real estate agents and developers had only printed brochures, not always high-quality photographs, drawings, and empty buildings at their disposal. They had to put in a lot of effort to convince the client to buy this or that house. With high-quality 3D visualizations, they can help buyers imagine themselves living in it, revealing the full potential of the building even if it does not exist or is completed yet. 

3D visualization and animation technologies, virtual and augmented reality, which is used to present real estate, cause excitement and delight in buyers, encouraging them to buy.

Architectural visualization allows you to present the future structure in the form of a graphic object that can be viewed in great detail and from all angles. The property may be in different stages of development. It can also be empty or inhabited. If sellers want to list the house they still live in quickly, they don’t need to clear the space or move furniture to take sale photos. All that is needed is to provide 3D visualization companies or professionals in the field with the correct room dimensions and house plans. Then they get attractive and realistic images of their home that can be placed on websites, social networks, outdoor advertising, sent to realtors, etc.

3D visualization of a residential complex allows showing the client favorable angles, seeing how not only the facade of the building will look, but also its adjoining territory. The projects realistically depict playgrounds, garages, lanterns, and other landscaping elements, and the final image cannot be distinguished from a photo.

3D visualization has also become an integral part of the marketing of commercial or industrial real estate, making it possible to create compelling presentations and videos to impress investors and earn their trust. They help to demonstrate the different stages of construction and focus on the key benefits and details of the structure.

Now, architectural project visualization is an essential step and an important element in construction planning, and not a single architectural project is complete without 3D modeling and visualization technologies.

If you’re planning to sell, build or develop a property, 3D rendering can streamline your process and help you grab the attention of investors and buyers. Even if you want to list for sale real estate as is, you may need beautiful images of the home to be successful among purchasers. Applet3D offers a variety of 3D rendering services for different property types, including residential, commercial, site plans, and much more. We help architects, designers, real estate agents, and everyone who wants to bring their projects to life, regardless of complexity and scale. Find out more about our 3D rendering services or Contact us and tell us about your idea.

What is real estate investing?

Investment in real estate is the investment of money in objects under construction or ready to receive income. There are two ways to earn income from real estate:

• renting it out is a capital investment;
• reselling it at a higher cost is a speculative investment.

Property investment can be of several types. The difference between them is in the object of investment, as well as your goals. There are such types of investments:

• in residential property- when you buy an apartment or house in order to rent or resell at a higher price;
• in commercial objects- you buy an office, retail, or warehouse space, which you also rent or resell;
• to foreign real estate – gaining popularity, you can buy the property abroad to also rent it out or resell it;
• in real estate under construction – a very popular type of investment, you buy an apartment from the developer at the excavation stage, which can be resold for a much higher price.

Let’s figure out how to start real estate investing.

How to invest in real estate?

If you are interested in defining real estate, you may be looking for answers on how to get into real estate investing. But it is worth taking into account that investing in property for beginners can seem like a somewhat complicated process. That is why you need to know all the ways how to make it most profitable. There are some common ways to invest in real estate:

Direct investments. From the point of view of a retail investor, the easiest way to invest is when he buys real estate or a share in it. Homeownership is the most common direct investment in real estate. An investor buys an investment property to capitalize on the difference by selling it for a higher price than what was paid for it or to earn rental income. Buying a property for a short period and then reselling it at a profit is called “flipping”,  this technique requires the purchase of an undervalued property.

Direct investments. From the point of view of a retail investor, the easiest way to invest is when he buys real estate or a share in it. Homeownership is the most common direct investment in real estate. An investor buys an investment property to capitalize on the difference by selling it for a higher price than what was paid for it or to earn rental income. Buying a property for a short period and then reselling it at a profit is called “flipping”,  this technique requires the purchase of an undervalued property.

Real estate mutual funds are funds that invest primarily in securities offered by public real estate companies.

Exchange-traded real estate funds (REIT ETFs). With the help of exchange-traded funds, it is possible to invest in REITs, real estate services firms, and real estate development companies. In this case, the real estate investor will be dealing with a sector or niche fund.

Real estate investment groups. Members pool their money to buy and rent real estate. The company managing the group manages the facilities in exchange for a portion of the monthly rent.

Unlike other investments, real estate is highly dependent on geographic location and surroundings. As realtors say – location is most important. Barring serious downturns in the economy, the value of residential property depends primarily on local factors. These factors include employment rates, the local economy, crime rates, public transportation, school quality, utilities, and property taxes.

Commercial or residential real estate: where to invest?

There are significant differences between investing in residential and commercial real estate. Each of these real estate categories has its features, that you need to consider. On the one hand, residential real estate is usually cheaper and smaller than commercial one, so it is more accessible to smaller investors.

On the other hand, commercial real estate often has a higher cost per square meter and leases for longer periods, theoretically providing a more predictable income stream. More income means more responsibility.

Renting commercial property is more strictly regulated than residential, and the rules may differ not only from country to country but also from city to city. Even within cities, zoning regulations can increase the difficulty of investing in commercial objects.

When renting commercial real estate, there is also an increased risk of tenant turnover. If the tenant has a bad business model, a not-very-attractive product, or bad management, he can declare himself bankrupt. Failure in business can prevent you from generating income from expensive real estate.

Moreover, the property can not only grow in value but also depreciate. Everyone knows that once-popular retail outlets can eventually turn into forgotten half-dead shopping centers. In this case, investments in residential real estate look more reliable. So, if you want to become a real estate investor, you need to carefully study the market, the pros and risks of a particular area, and work out all the options.

Real estate investment benefits and risks

Conclusion

The housing industry plays a key role in the economy of many countries, including the United States. The real estate sector is always dynamic, offering new opportunities for investors. However, it is also part of a chain with some important factors that could decide the future of the market. One of the factors that have a direct impact on the real estate market is demand. And various data show that it often fluctuates depending on the type of property. That is why real estate investors need to understand well what type and in what way they want to invest and always keep their finger on the pulse.

In this article, we figured out what’s real estate, learned what are the main types of real estate properties and their differences and features. We also revealed the secrets of investing in real estate for beginners and what is the real estate business in general. In the modern world, the purchase and sale of real estate can hardly be carried out without 3D visualization. Use our 3D rendering services or Contact us and we will answer all your questions.