Many people have likely considered the prospect of diving into the real estate industry, only to back away once the complexity became clear. In truth, real estate can be quite complex, though the basics are available to anyone.
Before we get into the basics of the real estate industry, it is essential to understand what real estate is. In general, real estate includes property such as buildings, land, and even the air rights above that land. More often than not, though, people are more concerned about the land or its structure.
Types of Real Estate
There are four main types of real estate: residential, commercial, industrial, and land. Residential real estate covers both existing homes and construction projects. Additionally, residential real estate has several subdivisions, single-family homes, co-ops, townhouses, condos, etc.
Commercial real estate covers everything from stores to schools and hotels. Often, apartments fall into this category, despite their residential nature. This is because they have the potential to produce income, as with everything else in this category.
Industrial real estate refers to manufacturing facilities and property. This includes warehouses and any other building used to support, produce, study, or store goods.
Finally, there’s land. Land can refer to vacant property, such as buildable lots (which can become residential, commercial, or industrial). It also covers farms, ranches, and everything else that could result in a property without a building.
Real Estate Agents
Real estate agents are those that specialize in the industry. They help connect potential buyers with sellers and vice versa. They use the Multiple Listing Service and professional contacts to succeed in this goal.
A real estate agent can be independent, a group of individuals, or a large company. Typically, one will notice two agents involved with every real estate transaction, as one represents the seller while the other represents the buyer.
Real Estate Investing
Investing in real estate can be fairly lucrative, so it has become very popular as of late. There are many reasons people opt to invest in real estate, including diversifying their portfolios, choosing a lower-risk investment, or creating a new source of primary income.
Why is real estate investment considered a lower risk? Real estate has a low or negative correlation with the stock market. In other words, it isn’t tied to the same trends the stock market is. Something that could cause the stock market to crash will likely cause real estate to skyrocket in price. Thus, this is the safest route to take when one is looking to diversify a portfolio.