Reality shows like Million Dollar Listing and Flip or Flop may not give an accurate depiction of real estate; the industry encompasses numerous jobs, responsibilities and terminology that are all different for every job and responsibility within it. No matter your level of knowledge in real estate, this guide provides essential definitions and terms relevant to real estate for beginners or experts alike.
Definition
Real estate encompasses land and any structures built upon it, such as houses, office buildings, strip malls and apartment complexes. Real estate also encompasses any natural resources found on its surface such as trees, water sources or valuable mineral deposits; as well as any improvements such as roads, sidewalks or fences made artificially to improve it.
Residential real estate is by far the most prevalent form of real estate, including single-family homes and multi-unit complexes containing four or more units. Other forms include condos and townhouses.
Investors typically purchase real estate either to use as their primary residence or invest. When purchased as an investment property, an investor can make money through renting it out or selling it later at a profit – known as “flipping”. Investment properties tend to carry different tax implications than real estate purchased for residential use.
Types
Real estate encompasses land and the structures attached to it, such as houses, offices, apartment buildings and strip centers. Real estate also includes any applicable zoning laws as well as permanent resources like water or minerals that have become part of its fabric.
Residential real estate refers to properties used for housing individuals, families and groups of people. This category encompasses single-family homes, condos and multi-unit rental properties which contain four or more apartments.
Commercial real estate, commonly referred to as non-residential real estate, refers to non-home properties used to generate an income for their owners, such as office buildings, shopping malls and manufacturing facilities.
Raw land is another form of real estate, meaning property that does not yet contain buildings or structures. Investors purchase this form of real estate with plans of either developing it themselves or selling it off to developers who will construct buildings therein. Since it requires less upkeep and maintenance costs for investors, raw land may often prove less costly overall.
Investing in Real Estate
Real estate investments offer not only diversification of an investment portfolio, but can also yield high long-term returns that often outstrip inflation and provide rental income streams.
Real estate values tend to be more stable than stocks, which can sometimes experience drastic price swings. Furthermore, having good credit can help secure you an advantageous mortgage with competitive interest rates, saving significant sums of money over time.
Real estate investing also comes with tax advantages. For instance, you can deduct property taxes and mortgage interest expenses from your income tax return, significantly increasing the return on investment. Furthermore, as you pay down your mortgage loan you build equity that can then be used to acquire more properties thereby expanding your cash flow and wealth even further. Plus you can switch primary residence at any time without risking capital or investments!
Preparation
Real estate may seem complex, but the process of purchasing and selling property can be relatively straightforward. Most transactions involve an intermediary broker who acts as an intermediary between buyers and sellers in order to ensure all parties involved understand their legal rights and responsibilities during a real estate transaction.
Before sitting for your real estate license exam, it is wise to enroll in a prep course from a reputable provider who offers multiple practice tests and free initial assessment of your strengths. Such courses include refined materials which focus on what matters for passing the state exam while not covering unnecessary topics that won’t show up there.
Once you’ve completed your pre-licensing classes, research the exam format in your state to assess how many hours of studying you need before test day. Next, create a plan to log your study hours as well as locate study partners or groups for support.
