Real estate is one of the most important investments a person can make. It’s not just about finding the right property – it’s also about choosing the right real estate agent. Real estate is a great investment for many reasons. You can enjoy an excellent rate of returns, tremendous tax advantages, and leverage real estate to build your wealth.
Real estate is the land and any permanent structures, like a home or improvements attached to the land, whether natural or man-made. Real estate is a form of real property. It differs from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.
There are several types of real estate, each with a unique purpose and utility. The main categories are:
The explanations below will be a helpful guide for anyone looking to understand how the industry works and what each of the significant categories represents.
Land is the foundation of all types of property. It can be anything from raw lands, such as acreage or tract in nature; it could also represent building sites that have been approved for development but remain vacant due to a lack of construction activity. Developers acquire land and combine it with other properties (called assembly) and rezone it to increase the density and the property’s value.
Residential real estate consists of housing for individuals, families, or groups of people. This common asset class can be broken down into single-family homes, apartments or condos, and townhouses for those who share accommodations.
Commercial property is an exciting investment opportunity. It refers to land and buildings that are used by businesses to carry out their operations. These include shopping malls, individual stores, office buildings, parking lots, medical centers, and hotels.
Industrial real estate is a valuable asset. It refers to land and buildings that are used by industrial businesses for activities such as factories, mechanical productions, research and development, construction, transportation, logistics, and warehousing. The market has seen an increase in demand for this kind of property because of the growing number of resources needed by newer industries.
Real estate values will always increase over time.
History proves that the longer you hold onto your real estate, the more money you will make. The housing market has always recovered from past bubbles that caused home appreciation to slip. For those who held on to their investments during those uncertain times, prices have returned to normal, and appreciation is back on track. As a result, real estate investors in the top-performing markets are enjoying a windfall.
An investment in real estate can also diversify your portfolio.
If you’ve ever spoken to a financial planner about investing, you are very aware of the importance of diversification. When you diversify your portfolio, you spread out the risk. Real estate will always serve as a safe tangible asset to mitigate the risk in your portfolio. Many have amassed wealth by solely investing in real estate.
Last but not least, real estate investing comes with numerous tax benefits.
You can get tax deductions on mortgage interest, cash flow from investment properties, operating expenses and costs, property taxes, insurance and depreciation (even if the property gains value), and other benefits. The end of the year is a very busy time for real estate because people want to take advantage of the numerous tax benefits before the end of the year!
