The real estate industry encompasses the industries and professions that design,
finance, develop, construct, market, and manage land, property, and buildings. Its
diversified operations include commercial, industrial, and residential properties. In
addition, the industry includes professionals that facilitate the exchange of real
estate; appraisers, lenders, attorneys, brokers, and agents. The real estate business
is generally considered to be more stable than many other businesses because of
the tangible nature of its assets. The value of real estate can also be determined by
its location and use.
The seven features that distinguish real estate as an investment are scarcity,
improvements, investment permanence, location, indestructability, and uniqueness.
Scarcity refers to the limited amount of available land that can be purchased and
occupied. Improvements refer to any changes made to the land that increase its
value, such as paving roads, installing plumbing and electrical systems, or building
structures. Investment permanence refers to the length of time an investor intends
to hold onto a property. The location of a property affects its value because it is
surrounded by other properties and because the surrounding environment can
impact a property’s usage. Finally, uniqueness refers to the fact that no two pieces
of land are identical.
Depending on the type of real estate, there are different methods of investing in it.
The most common is direct investment, in which an individual purchases a stake in
a property. Another way to invest is through real estate investment trusts (REITs),
which are publicly traded companies that buy and operate properties. REITs offer a
diversified portfolio that is usually less risky than direct investments in individual
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Residential and commercial are the main types of real estate. Residential real estate
consists of single-family homes, condominiums, townhouses, and multifamily rental
properties with four or more units. Commercial real estate consists of office
buildings, malls, retail stores, and other facilities that generate revenue through rent
Real estate investments are affected by the economic climate, including interest
rates, inflation, and employment. In addition, demographic trends can influence real
estate prices and types of demand. For example, the retirement of baby boomers is
expected to impact housing demand for the next several decades.