Most people associate “real estate” with houses and buildings. But at the most basic level, “real estate” is land and what you do with it.
- You can own it.
- You can lease it.
- You can build on it, or take over buildings already there.
- You can farm it.
- You can even mine it for minerals.
There are two additional factors involved in making a piece of land “real estate.” The first is that you have a financial interest in the land (and usually have directly invested in it monetarily). The second is that you are using it lawfully and within local zoning restrictions.
You can lease it. You can build on it, or take over buildings already there. You can farm it. You can even mine it for minerals. There are two additional factors involved in making a piece of land “real estate.” The first is that you have a financial interest in the land (and usually have directly invested in it monetarily). The second is that you are using it lawfully and within local zoning restrictions.
You can build on it, or take over buildings already there. You can farm it. You can even mine it for minerals. There are two additional factors involved in making a piece of land “real estate.” The first is that you have a financial interest in the land (and usually have directly invested in it monetarily). The second is that you are using it lawfully and within local zoning restrictions.
You can lease it. You can build on it, or take over buildings already there. You can farm it. You can even mine it for minerals. There are two additional factors involved in making a piece of land “real estate.” The first is that you have a financial interest in the land (and usually have directly invested in it monetarily). The second is that you are using it lawfully and within local zoning restrictions.
If you’ve ever bought a house, your real estate agent or the title agent at the closing may have used the following legal phrase: you are buying “the land and any improvements on it.” “Improvements” usually refer to the building(s) (a house or a commercial building) on the piece of land you are buying.
The reason that agents and other officials refer to “the land” is that property can be used in different ways depending on the zoning. The three main ways property is used are: residential, commercial, and industrial. This flexibility in land use means that real estate is often one of the most profitable investments you can make.
Types of Real Estate:
- “Residential real estate” can include houses, apartment buildings, and even undeveloped land.
- “Commercial real estate” usually refers to office buildings, retail buildings, warehouses and storage buildings.
- “Industrial real estate” can include factories, farms, forested land, and mines.
Financial Interest:
You can own real estate or you can lease it. Both can be very profitable, but each is different in many ways.
If you own land (technically an “ownership interest”), you have the full rights as an owner. You can transfer the title to another person. You can sell it. And you can usually build on it within local zoning laws and codes. Owning the land also brings ownership responsibilities. You have to pay the property taxes on the land. You are responsible for property taxes, and for financial losses the land incurs (such as storm damage or decline in property values when you sell).
Leasing the land (having a “leasehold interest”) gives you rights as a tenant. In other words, you share rights to the land with the owner. Local laws and regulations might give you the right to build on the land. You might have the right to improve existing buildings. Ultimately, the contract you sign with the owner of the land determines your tenant rights.
Again, you can make money either way. For instance, as an owner, you can rent the land or its buildings. As a tenant, you can use the land to live on, work on, or lease to another tenant. (Again, all this depends on local laws.)
Most of you are probably interested in owning real estate. As an owner, you can rent the property, improve the property for later sale (and profit), or use the land yourself. Generally speaking, owning is more straight-forward than leasing.
Long-term leases are also an investment opportunity, however. But remember that once the lease is up, the land (and any improvements you’ve made to it) returns to its original owner.
Keep the concept of “land” in your mind. The land, and the changing value of the land, will determine whether you make a profit on it, and how much!
Now that you know the basics of “what are Real Estate Investments” watch our videos to learn advanced techniques.