Real estate is one of the booming businesses in the country today. Real estate is defined as real property that is made up of land and improvements that include fixtures, buildings, structures, roads and utility systems. The term “real estate” means actual or real physical property. Real is derived from the Latin word that means ‘royal’, since many kings used to be the sole owners of all of the land that made up their kingdom. And fun fact: in the original United States Constitution, it outlined that only property owners were eligible to vote. This, thankfully, has changed. Though most people in the United States now own their own property anyway!
When we think of “real estate”, most minds go directly to homes, or property in which people are tenants. But little do many people know: there are actually four types of real estate, and they don’t all have to do with houses. To know more about these types, check out this article!
Types of Real Estate
If you are interested in going to the real estate business, or simply just curious about that world, you must know that there are four different types. Each of these are unique and have their own purpose and utility. The four types of real estate are as follows:
Here’s a bit more in-depth about each of these types of real estate:
Land Real Estate
This is the most basic kind of the four types. Simply put, these are plots of land that haven’t been developed at all, or only have minor updates. These are mostly the undeveloped property and vacant land that includes the reuse, early development, site assembly as well as subdivision. Developers buy the land and then combine it with other properties which is known as ‘assembly’. They then rezone this so they can increase the value and density of the property. Once there have been considerable developments to an expanse of land, it becomes considered one of the following types of real estate:
Industrial Real Estate
Industrial real estate refers to the land and buildings that are used for industrial activities like warehousing, transportation, construction or factories. These are also used mechanical production as well as research and development. The buildings are sometimes used for storage, research, production and distribution of goods. However, some consider the buildings used for distributing goods to also fall under commercial real estate, but the construction, zoning and sales are all handled differently.
Commercial Real Estate
These are your places of business, AKA commercial land and buildings used to carry out business operations. This includes shopping malls, office buildings, strip malls or individual stores or boutiques. Hotels, medical centers, apartments and parking lots are also included in this type of real estate. Basically any property upon which business is conducted with paying customers is considered commercial real estate.
Residential Real Estate
Residential real estate is the most common type. This is what most people think of when they hear the term “real estate.” These properties consist of housing for families, groups or individuals. Residential real estate include apartments, single-houses, townhouses, condominiums as well as other types of houses and living arrangements like multi-generational houses or vacation homes.
How It Works
There are several areas in the real estate world that you can explore and find a career in the future, or simply uncover interesting information about how the real estate world works. They are divided into 6 areas, which we will discuss in further detail below:
- Property management
- Real Estate Lending
- Professional services (law, accounting, etc.)
- Sales and marketing
Property management is when the real estate agency or firm helps the homeowners rent out their houses or units in their building. They are the ones responsible for showing the units to interested tenants, fixes deficiencies, make repairs, and carries out necessary management responsibilities that are required for maintaining the property. They get paid by charging the owners for a percentage from the rent of the tenants in the complex or property for their services.
Real estate lending on the other hand helps lenders, and these people play a big role in the development of the property and use this to finance their business. The lenders are usually consist of banks, private lenders, credit unions as well as government institutions.
Professional services is an area of real estate where there are professional agents working for the firm to help it function. Some of the most common examples of people who are considered to provide “professional services” are accountants, interior designers, general contractors, lawyers, construction workers and even people in the trade.
Development or real estate development is an important area wherein developers process the purchased land, rezone and construct or renovate buildings on the property. These are then sold or leased to end users. Developers earn their money by adding value to the land by taking on the risk of financing a project that they can later flip for profits to individuals or businesses that want to use their land for any given purpose. These people typically know all of the necessary city codes and zoning laws that list requirements for how buildings must be structured. There is a lot of knowledge and planning that goes into real estate and land development.
Sales and marketing as it applies to real estate are people and departments that typically work in collaboration with the developers to help sell the building and units they have developed or created. They earn through commission for making all the marketing sales and materials needed in order to help sell the units or properties. Most of the time these firms assist in selling newly developed buildings and other properties.
Brokerage on the other hand is a firm that employs or hires a team of real estate agents or realtors in order to facilitate a transaction among buyers and sellers of a property. It is their job to represent the firm and help them purchase or make a sale with the best terms that they can come up with the buyer.
How Does One Get Into Real Estate?
Becoming a real estate agent or diving into other related careers can be extremely fun and rewarding. According to recent studies, the median pay of a real estate agent is estimated to be around $46,000 from the US Bureau of Labor Statistics. All you really need is a license, no college degree necessary! Not only that, agents also get commissions, and if they have the experience, they can earn as much as $100,000 or more each year. No wonder people take interest in this kind of work. But how do you become involved in the real estate?
Some people, by sheer luck, become real estate moguls simply because they work hard or that they have been introduced into the business early on, even before people took it seriously. However, there are now qualifications that one must have in order to become a real estate agent. Here are the basic qualifications that one must comply in order to become one:
- Application process and fees
- Background checks and fingerprinting
- Continuing education
- Education requirements (such as a high school diploma or GED but most of the time no college degree is required)
- Exams and exam eligibility
- Pre-licensing courses and post-licensing requirements
- Process for achieving the next level of licensing
- Reports or criminal history
In some states, a license is needed in order to qualify to be a real estate agent. There is a reciprocal licensing agreement in some areas too which means you can get a license in one state and use it in another without getting another exam to qualify. However, keep in mind that each state has their own process in order for one to get a license through reciprocity. Make sure to check within the area you are living for the requirements needed.
Getting a license may take time and money, but in the end, it can be a really rewarding career. There is also flexibility in comes to career opportunities too. You may even consider going into different real estate designations and other certifications in order to specialize in one area. If you wish to be in the business then the best thing that you can do is study not only the four types of real estate, but explore even further into the possibilities that are offered through real estate. This way you have the knowledge you need in case you decide to become an agent or simply purchase a property or sell it. Either way it is always a good thing to educate yourself about these things as they can be handy in the future. Good luck!