Reviewed by Feb 19, 2021| Updated on
Real estate is a property consisting of the land and buildings on it, the natural resources of the land including flora and fauna, and livestock. It is a tangible asset and a type of real property owned by a person. Real property includes land, buildings and their improvements. It also covers the right to use the land and all its improvements.
The real estate property should not be confused with the personal property. Personal property includes intangible assets like investments, along with tangible assets such as furniture, jewellery and so on.
Real estate is divided into three categories: residential, commercial and industrial. Investing in residential real estate is much more inexpensive as compared to commercial ones and is more feasible to individuals. However, commercial real estate is more valuable and stable.
Residential real estate includes undeveloped land, houses, condominiums, and townhouses. The structures may be single-family or multi-family dwellings and may be self-occupied or rented-out.
Commercial real estate includes non-residential structures such as office buildings, warehouses, and retail buildings. These buildings may be free-standing or in shopping malls.Industrial real estate includes factories, business parks, mines, and farms.
These properties are usually larger in size and locations may include access to transportation hubs such as rail lines and harbors.
Investments in real estate is directly affected by its geographical locations and surroundings. Such surroundings include the local economy, crime rates, transportation facilities, quality of schools, municipal, and property taxes.
As far as investment is considered, real estate offers income and capital appreciation to the investors. One can invest in real estate directly or indirectly through buying the shares of real estate investment trusts (REITs).
Since ages, the investors have been making profits, by directly investing in real estate, from rent or leases and appreciation of the real estate's value.
Here's the list of pros and cons of investing in a real estate property: Pros 1. Steady income 2. Capital appreciation 3. Portfolios is diversified 4. Bought with leverage Cons 1. Liquidity is bad 2. Influenced by local factors 3. Needs huge initial outlay 4. Requires active management and expertise