Interested in buying a house so that you no longer have to pay rent to the landlord every month? Or maybe most of you are more interested in owning real estate products such as apartments or shop houses with the aim of targeting future investment values.
This intention is certainly not surprising because the real estate business is always attractive to investors, including those of you who want to change their status from tenant to owner. Rocket Mortgage said that real estate is an attractive alternative or additional investment besides stocks, bonds, and mutual funds. But investing in real estate also has its risks and challenges. Because investing in real estate is not as easy as buying stocks.
The term real estate refers to a piece of land along with any attachments or improvements, whether natural or man-made, that may be on the land. Natural attachments may include water, trees, minerals, and oil. While artificial enclosures include houses, buildings, walkways, and other features that are built to enhance land and serve as residential or commercial buildings. Understand more about real estate and how to play it through the following article.
The definition of real estate is land
So far, when you hear the term real estate, the first thing that comes to your mind is an area that is being developed as a place to live. Important information, there are rules regarding real estate that vary from location to location, rules about limits on how many buildings are allowed in one block, to what types of city services span those buildings.
More deeply citing the Bank Rate, real estate is defined as land plus any buildings and resources on that land. Real estate can be used for commercial purposes such as operating a shop or office, or for industrial purposes such as operating a mine or factory. However, the most common type of real estate is residential real estate which is used for housing.
Residential areas include a variety of potential residences, ranging from small-type houses to luxury-type houses. What is clear, residential real estate arises when land that is approved for residential use is purchased by someone and converted into real property.
Real Estate Category
As explained above, it can be concluded that real estate can include property, land, buildings, air rights above ground, and underground rights below ground. This term refers to the real or physical property. As a business term, real estate also refers to the production, purchase and sale of property.
Not only that, as part of the real estate business, it also affects the country’s economic growth because it is an important driver in the economic sector. There are several types of real estate, each with a unique purpose and use. Some of the main categories are discussed below.
1. Residential Real Estate
This property type refers to any property that is used for residential purposes. Residential real estate consists of housing for individuals, families, or groups of people. Examples include single-family homes, condominiums, co-ops, duplexes, townhouses, and multi-family residences with fewer than five individual units.
2. Commercial Real Estate
Commercial property refers to the land and buildings used by businesses to run their operations. Or in other words any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, restaurants, shopping centers, shops, and theaters.
Industrial is property used for manufacturing, production, distribution, storage, and research and development. Industrial real estate refers to land and buildings used by industrial businesses for activities such as manufacturing, mechanical production, research and development, construction, transportation, logistics, and warehousing.
Usually refers to properties that have not been developed and are still vacant land. Developers acquire land and combine it with other properties, as well as zoning them so that they can increase density and increase property values. Including undeveloped properties are vacant land, and agricultural land (agriculture, orchards, livestock, and forest land).
Real estate can include property, land, buildings, air rights above ground, and underground rights below ground. This term refers to the real or physical property. As a business term, real estate also refers to the production, purchase and sale of property.
5. Special Purpose
Real estate with special purposes for public use, such as cemeteries, government buildings, libraries, parks, places of worship, and schools.
Difference between Real Estate and Real Property
Real estate or real property? These two investment terms have a lot in common, but there are also key differences. Therefore, first understand the definitions of these two concepts. Quoting the explanation in the book “How to Get Rich Through Property”, real estate that has been Indonesian into real estate is defined as land with all its improvements and developments.
The improvements in question are all man-made attached to the ground. Thus, real estate can be interpreted as land and all objects that are attached to it (in the form of buildings) and those that are attached to it (yards, fences, roads, canals, and others that are outside the building).
Residential real estate, as reported by Million Acres, includes properties that are intended to be sold to buyers or rented out to tenants. This includes houses, townhouses, and apartment buildings. Commercial real estate also deals with land and buildings, but has a distinct focus on business leasing, which includes offices, restaurants, and retail establishments. There is also a subcategory of commercial real estate known as industrial real estate, which includes investment properties such as warehouses used in manufacturing and large-scale production.
On the other hand, real property is defined as interests and rights related to ownership of land, buildings, and improvements attached to them. Real property is similar to a term that refers to land and any additions or improvements made to it.
But behind the physical properties of real estate, real property also includes the owner’s right to use and enjoy the property. So it’s important to know when you use the terms real estate and real property when talking about the land and buildings themselves or the ownership rights that go with them.
How to Invest in Real Estate
Buying and owning real estate has always been an investment strategy that can be both satisfying and profitable. Unlike stock and bond investors, you can use leverage to buy property by paying a portion of the total cost up front, then paying off the rest, plus interest, over time. Meanwhile, when viewed from the side of the amount of the down payment, generally it requires between 20 percent to 25 percent. In some cases only a 5 percent down payment is required to purchase the entire property.
As a real estate professional, you also have the potential to make a lot of money if you do your research, work hard, and put in the time. Because people will always need shelter and a place to work, and they need real estate professionals to help them find homes, office space, and other properties.
There may be more competition when the economy is weak, but there will still be opportunities in the real estate business. In addition, there are at least five main ways if you as an investor want to make money in the real estate business.
- One of the main ways you can make money in real estate is to become a rental property owner. You can buy less valuable real estate, repair it, and sell it, and you can also earn an income.
- You join the real estate investment group, as it’s an easier way to make money in this business.
- Joining a real estate investment group is an ideal way for those of you who want to own rental real estate without the hassle of running it. In a real estate investment group, a company buys or builds a set of apartment blocks or condominiums, then allows investors to buy them through the company.
- Invest in Real estate investment trusts (REITs). REITs are essentially dividend-paying stocks.
- The ideal real estate investment platform for those of you looking to join others in investing in larger commercial or residential deals.
- Investments are made through online real estate platforms or better known as real estate crowdfunding.
How the Real Estate Industry Works
The real estate business involves many aspects and it may not just happen. This industry involves buying and selling property. Not only that, in terms of ownership, it is also complex, some are owned by the government, corporate entities, or private parties.
The real estate industry also refers to the creation, buying and selling. This industry is an important driver of economic growth in almost all countries. For a clearer picture of real estate, here’s an overview of how the real estate industry works.
1. Real Estate Development
This process involves purchasing raw land, rezoning, constructing and renovating buildings, and selling or leasing finished products to end users. Developers benefit by adding value to the land and taking the risk of project financing. New home construction is a vital category. This includes the construction of single-family homes, townhouses, and condominiums. New home sales are a leading economic indicator.
2. Sales and Marketing
Sales and marketing companies work closely with developers to sell built buildings and units. These companies typically focus on new units and earn commissions on creating all marketing materials and selling inventory of completed units.
3. Broker or Broker
There are brokers who employ a team of real estate agents (middlemen) who help facilitate transactions between buyers and sellers of property. His job is to represent one of the parties and help achieve a purchase or sale on the best terms.
4. Property Management
Property management companies help real estate owners rent out units in their buildings charging a percentage of the rent, to property owners. His main duties include collecting rent, showing units, fixing flaws, making repairs, and managing tenants. They charge a fee, usually a percentage of the rent, to the property owner.
5. Real Estate Purchase
Everyone who buys or sells a house participates in real estate investing. That means you have to consider many aspects. Many people are doing so well investing in homes that they want to buy and sell homes too.
First, you can buy a house to repair and then sell it. Or you own several houses and rent them out. You can even put money into housing without buying a house. You can also buy home builder stock.