Understanding Real Estate

When it comes to real estate whether you are buying or selling its important to have a clear understanding of what you need to know to get you on the right path of your next investments.

With real estate this can include property, land, buildings, air rights above the land, and underground rights below the land. The term refers to real, or physical property. As a business term, real estate can be referred to producing, buying, and selling property. Real estate is an essential tool for economic growth.

To get started we are going to break down what real estate involves, what a property valuation is and how knowing the current market value of a property can benefit your next real estate investment purchase. 

What is Real Estate?

 

Referred to as “real property” is land and other tangible improvements that are permanent, whether its natural or man-made this can include water, trees, minerals, buildings, homes, and fences.

Real estate differs from personal property, which refers to non-permanent attachments to the land such as vehicles, boats, jewelry, furniture, and equipment.

Real estate involves multiple factors, with certain components that can directly impact the economy. Understanding real estate as we often refer the terms of land, real estate or real property with each having their subtle distinctions.

  • Land the surface of the earth down to the centre as well as the airspace above, including trees, minerals, and water.
  • Real Estate includes the land, as well as any permanent man-made additions this includes houses and other buildings.
  • Real Property known as one of the two main classifications of property, included are the interests, benefits and rights inherent in the ownership of real estate.

In a nutshell Real estate includes

  • The physical surface of land (below and above it)
  • What’s permanently attached to the land
  • The rights of ownership (possess, sell, lease, and enjoy the land)

Personal property should not be mistaken for real property, which entails all property that is movable.

Physical Characteristics

In the economy, land has three physical characteristics that differentiate it from other assets. These include:

  • Immobility – parts of the land are removable, and the typography can be altered, whereas the geographic location of land can never change
  • Indestructibility – the land that is durable and indestructible
  • Uniqueness – no two parts of land are identical, although they may share similarities, they differ geographically.

Economic Characteristics

With economic characteristics of land this can influence the value for any investment.

  • Scarcity – land isn’t considered rare, but the total supply is fixed
  • Improvements – the effect of the property’s value with any changes to the land or building. Improvements of homes/fences is referred to as improvements on the land when it involves sidewalks and sewer systems these are called improvements to the land.
  • Permanence of investment– land that has been improved, the total capital and labor used for the improvements will represent a fixed sizable investment.
  • Location/ Area Preference– depending on your choice and individual taste factors such as convenience, reputation, and history. As they say location is everything and the most important economic characteristic of land when investing in real estate.

Types of Real Estate

  • Residential– family homes, duplexes, townhouses
  • Commercial – business purposes, gas stations, stores, hospitals, offices, parking etc.
  • Industrial – used for manufacturing, production, distribution, storage, and research development (factories, power plants and warehouses)
  • Land – including undeveloped, vacant and agricultural land (farm, ranches and timberland)
  • Special Purpose – used by the public, cemeteries, government buildings, libraries, parks, and schools

Investing in Real Estate

Investing in real estate is a great opportunity, if done correctly and understanding there are risks involved in any investment you need to have a clear understanding of what investment will benefit you and what expectations and goals you have for real estate investment in the future. There are several ways to invest in real estate, but these are the most common:

  • Homeownership
  • Rental Properties
  • House Flipping

Buying a physical property, you are able to make money two different ways, Revenue from rent or leases and appreciation of the real estate’s value.

Real estate unlike any other investment can be dramatically affected by its location. Other factors that can affect real estate prices to increase or decrease are employment rates, local economy, crime rates, transportation, quality of schools and property taxes.

Pros

  • Offers steady income
  • Offers capital appreciation
  • Portfolio diversification
  • Bought with leverage

Cons

  • Illiquid
  • Influenced by highly local factors
  • Requires a big initial capital deposit
  • May require active management and expertise

Property Valuation Services

Firstly, a property valuation is a process used to identify the current market value of a property. An estimate of what the market thinks your property is worth at the time.  A property valuation is conducted by an industry trained professional valuer that has experience in either fields of residential, commercial, industrial, or even business-related purposes.

For an accurate and efficient property valuation report choosing the right company is important, the high standards of the right company to look out for include:

  • Qualified property valuer with over 20 years’ experience 
  • Registered as a certified practising valuer (CPV) 
  • Member of the Australian property institute (API)  
  • Specialised in the field of property related purposes you are interested in
  • Unbiased and legally binding documentation

There are multiple valuation purposes to consider, and it all depends on the type of property you are interested in. The type of valuation service required will depend on what purpose you have whether you are selling, buying or just require more information regarding a property and its true market value.

With any valuation you will receive a report completed by an independent valuer, that will include extensive research and data to determine the fair market value of the property, the valuer will also account during the inspection the following:

  • Information of the property, including property type, use, size, and location
  • Details of the property, such as its overall condition, materials used in construction, and fixtures and finishes 
  • Local market evidence from comparable properties, as well as the details of the properties a

              assessment of the current market conditions.

Keep in mind that a property valuation is an essential tool to have when making any informed decisions for the future of your investment planning as well as your financial capacity.

Speaking to an expert when it comes to property will have you on the right track as well as giving you the right knowledge and understanding of what it takes to be a part of the real estate market.

At the end of the day property ,no matter the type, will be one of the biggest assets you will own.

Author Bio

Brandon Cagle

A leader in the valuation industry, Brandon Cagle is one of Brisbane’s finest property valuers. With decades of experience in the Queensland property market, Brandon uses his expertise to complete valuations across residential, commercial, and industrial property types, and is adept at valuating more specialised properties or purposes. Brandon is certified and registered with the Australian Property Institute (API)