How is real estate defined? In theory, it covers the entire land, property and everything that can be found on the property from natural resources to man-made structures.
Real estate categories
When we talk of real estate, it is usually in the context of housing or residential ownership. However, it covers more than family homes because it could also be applied to commercial and industrial assets like farm lands, vacation houses, headquarters, malls, and factory buildings.
How value is assessed
It is different from other types of investment because the market value directly depends on the quality of its location. Local issues like the area's economic standing, its crime rate, the quality of education and the cost of property tax are factors that directly affect the prices of a property. Throw in more issues like global and national recession, and you have very unpredictable market.
Investment real estate and real estate investment
Are the two the same? No. These two phrases are used in totally different contexts. Investment real estate is a type of property acquired for the purpose of generating income as an asset, not as a home for the family. When a buyer acquires land for the reason of building his financial portfolio, then it is investment real estate. However, when you say real estate investment, it covers every type of reason for buying property either for commercial or residential use. Thus, the house that you are paying mortgage is a real investment property. So is a vacation house in, say, Carmel, Indiana.
Understanding mortgage
When you say mortgage what comes to mind? For sure it's about paying the bank every month with a fixed amount until term ends or else foreclosure, is the image that will come to mind. Well, the picture is not off the mark. The reason why most buyers prefer to buy property through a loan is that a buyer just pays the value of the property in increment and not obliged to pay the whole amount upfront.
Factors that move the market value
The location of the property is the number one factor that determines the market value. Apart from demographics, the economy, government policies especially on tax and interest are aspects that matters for those who are planning to put money on realty.
A lucrative business
There is always a potential of earning millions if you get into this industry. However, to be successful in this business, you need to understand the process. Realty is more than just buying and selling land. There are lots of considerations to look at and rules to follow, if you want to be in this business. Mortgage, interest, and property tax are only dusts in the surface when talking about this industry.
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