The term “real estate” refers to the property and any physical additions to the land, whether natural or man-made, such as rivers, plants, minerals, structures, houses, and bridges. Real estate is real property (items attached to land), not to be confused with personal property like jewelry, phones, cars, etc.

Main Takeaways

  • Real estate refers to the property and any physical additions to the land, whether natural or man-made.
  • Residential, commercial, agricultural, raw property, and special use are the five major types of real estate.
  • There are different types of real estate investments including directly (rentals) and indirectly (REITS)

Different types of real estate:

While the phrases land and real estate are sometimes used interchangeably, there are some important differences

  • Land: Land refers to anything naturally created on this earth, including the dirt, water, trees, air, and minerals
  • Real Estate: Real estate refers to the raw land plus any others types of man-made structures such as housing and other types of buildings

Real estate, in broad terms, encompasses the land’s physical surface, what is above and below it, and what is permanently linked to it, as well as all ownership right. 

Unique characteristics of real estate.

Land has three physical qualities that distinguish it from other economic assets, one being the fact that land can not be created nor destroyed and the other being that no two lands is the same. While some land and the typography can be altered, land is permanent.

Real Estate’s Economic Characteristics

Additionally, real estate has two important economic qualities that affect its investment value.

Scarcity: New land isn’t being built nor is it being destroyed. It’s a fixed amount of supply.

Upgrades: Any additional structures that is built on the land are improvements made to the value of the property.

Types of Real Estate

Residential Real Estate: Any property that is utilized for residential reasons. The four major examples are Single-family homes, condominiums, townhouses, and multifamily housing (duplexes and apartment buildings).

Commercial Real Estate: Any type of property used for business such as shopping centers, gas stations, and restaurants.

Industrial Real Estate: Any type of property used to manufacture and distribute materials.

Land: Any type of undeveloped or agricultural land.

The importance of the real estate industry

The real estate sector is one of the major contributors when it comes to economic growth in the United States. The US Census releases a report every quarter of the total number of homes built and bought as a key indicator for the economy.

Despite the market’s size and complexity, many consumers believe the business is solely composed of brokers and sleazy real estate agents. However, millions of individuals earn a career in the real estate market, not just via sales, but also via appraisals, property management, finance, building, development, consulting, and education, among other sectors.

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