Ariel view of buildings by the Lazy Artist Gallery
Do you deal in real estate? Or, perhaps, do you design or construct it? Aside from using 3D rendering services for marketing materials, it helps to break down the different types of real estate to make your choices easier.
So in today’s article, we will be discussing what real estate is and diving into the four types of real estate.
Table of Contents:
Introduction: What Exactly is Real Estate?
Real estate, in simple terms, consists of two parts: land and every element that is attached to that piece of land.
These elements or assets incorporate natural resources (water-based components, minerals, plants, etc.) and immovable improvements that are executed on the land, such as structures or homes.
This land and other assets can be utilized for many purposes, such as:
Offering people a home to live in
Utilization of land for farming
Commercial property for businesses
This is where the types of real estate come into play.
In the investment world, the word ‘real’ refers to raw land, buildings, structures and other personal possessions employed as a guarantee or collateral.
There are many ways to invest in a real estate property, and this leaves even the most knowledgeable investors confused. We have brokers, real estate agents and real estate developers, who drive this exchange of income-inducing properties.
Why Real Estate is Unique and Diverse
Real estate is one of the largest industries around the globe. Currently, the real estate market is bursting, reaching 65.8% in 2020, and many people still invest their money in land and structures.
Let’s take a quick look at the economic and physical attributes of real estate that give it a unique standing and make it a means of of wealth generation.
Real estate is in ‘fixed supply’. There is only a limited number of structures that can be built on a single piece of land.
Every piece of land or structure is completely different from each other
Improvements made to the land can increase its value and aids in procuring more income
It’s marked by immovability. While improvements can be made to the land per se, the construction of sidewalks, streets, water and sewer systems cannot be tampered with.
Other than erosion causing the destructibility of land, it is perennial.
Location affects the value of the real estate in a significant way. Buyers investing in real estate factor in population, school districts, job growth, good neighbourhood.
There are varied and diverse options in real estate. This brings us to the four types of real estate and the potential benefits each of these have to offer.
Residential Real Estate
Commercial Real Estate
Industrial Real Estate
Land
Properties Used for Residential Purposes
The World Property Journal explains how the residential real estate market has grown over the years; it reached a value of $33.6 trillion in 2021. This is higher than the combined annual GDP of China and the US.
Residential real estate, one of the most income-inducing types of real estate, incorporates single and multi-family houses, villas, condos, townhomes, cooperative housing, etc. Residential properties or homes for sale are marked by certain characteristics.
Residential property includes both existing homes and newly erected ones.
It is a lot easier to secure financing for residential properties than commercial properties, owing to the low cost of entry.
A down payment of 3% to 10% of the structure’s buying price is considered enough to purchase it. This makes it an attainable investing alternative.
There are a couple of forms of investing in residential real estate:
Some owners opt for short-term investment and make a profit by flipping the property through renovation.
Long-term investment is another option, which constitutes purchasing the house for cash flow and using it as a rental property.
Exterior rendering of a home by BluEntCAD
Commercial Property Delivers High and Steady Income
One of the types of real estate is commercial real estate. The commercial real estate market was estimated to be only half the size of the residential property market in 2019. Alexandra Thompson evaluated it to be between $14 and $17 trillion.
The reason for this variance is that, while we all need a place to stay, not everyone has a requirement for commercial property.
Commercial property includes restaurants, hospitals, schools, shopping malls, etc. Here are a few interesting attributes of commercial real estate.
This type of real estate has leases that are long-term. It allows commercial property owners to demand more rent, providing a steadier and higher income.
Commercial properties require a high down payment, almost 20% of the purchase price. Furthermore, the expenses to manage the property are substantially higher.
REIT (real estate investment trusts) and crowdfunding allow property buyers to invest with a lower down payment.
Every commercial property is leased and managed in a different way. Even the pricing for this type of real estate is highly dependent on the income it generates.
Raw Land: Most Secure, Least Expensive
Raw land refers to vacant land that does not have any structures or improvements made on it. It is an undeveloped property and offers more flexibility when it comes to using the land.
Vacant land is one of the least expensive types of real estate and buying it is a sought-after long-term strategy.
Lands for sale come with minimal maintenance costs.
It is often bought for rights to natural resources or future development.
Farms, pastures, ranches, orchards, recreational parcels, and planned urban development fall under the category of raw land.
Investment in vacant land requires a massive amount of capital and a thorough knowledge of real estate that include zoning regulations, flood plains, etc.
Industrial Estate is Not Commercial Property
Even though industrial property is utilized for business purposes, it is deemed a distinct type of real estate. The use of this type of property iincorporates land transactions for the manufacturing of goods.
Industrial real estate incorporates storage facilities, production houses, solar-generating stations, warehouses, etc.
It is most often located in far off places to ensure people don’t get affected by any pollutants and chemicals produced in the manufacturing process.
The estimation of capital investment is tricky, as it depends on its nature, the purpose it is being bought for, and the location of the property.
Conclusion
The different types of real estate all come with their set of advantages and disadvantages.
Real estate developers play an integral role in creating value for the different types of real estate. They construct new and fascinating structures, renovating existing ones and using multiple techniques and processes to improve real estate sales.
If you’re a business thinking of selling or developing real estate, 3D rendering can streamline your process and get buyers and investors to sit up and listen.
BluEntCAD offers 3D rendering services to homebuilders, real estate developers, architects, interior designers, design build contractors and remodelers. Browse our portfolio to see how we’ve helped companies like yours.
Ready to grow your business with 3D render services? Contact us now!
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