Real estate is a piece of land with the other external additions like trees and plants within the limits of the boundary but real property is the land along with its rights in physical documents to own it. Though we say that real estate is just that piece of land, it can be broadly classified in three different ways and forms- residential, commercial and industrial.
- Residential real estates predominantly include houses, apartments, villas and other forms of townships. In the US, homeownership is the most common form of real estate investment and most of the residents of the United States are owners of their houses.
- -Commercial real estates concentrate mainly in business, office, warehousing and other forms of commercial requirements. This is completely different from the above category and is targeted only on those looking out for a commercial rental property. The rates for them generally depend on the area they occupy, in simple terms rent/square feet and are generally costlier than that of the residential ones. The area here would be smaller but the value for the vacancy would be higher.
- The third category is the industrial real estates. These include factories, farms, plantations and even mines.
All types of investments are aimed at generating income for the investor but among all of the real estate has a greater value for it is influenced constantly by one or the other societal factors. The income that comes from this sector is influenced by not just one factor but by many like area, development, amenities, schools and medical facilities, jobs and their proximity and other residency requirements.
People who are interested in real estate business need not necessarily own a land or an apartment. Many of them do this in partnership with one or the other and then distribute it among many small investors who try to see some extra pennies through rental properties. The general factors that bring a profit or loss to them are the land and rent appreciation.
Real Estate/property valuation
Many people think that it is just the buying, selling and bargaining of property value that comprises the real estate business. But in reality, it is not so and the dealers have to be efficient in subjects like investment analysis, real estate financing, taxation, insurance etc… This gives a person the complete knowledge and know-how in dealing with a particular property and is, in fact, an indication for his good and honest working.
Important factors that affect the property`s value
While determining the value of a property, there are many factors and concepts that play a major role.
Some of the valuation concepts are:
- Value – the first and foremost is the value of the property. Unlike the perishable and consumer goods, the value of a piece of land can be determined and realized over a stretched period of time. Social and economic changes, political influences, government rules and regulations also impact the valuation process by affecting the following:
- Demand – demand increases when a property is available with all the facilities that fulfill a proper living.
- Utility – the availability of facilities and their applications fulfilling the demand factor.
- Scarcity – availability of a particular land for a higher demanding force.
- Transferability – the ease and comfort with which the property can be transferred from one person to another.
- Value – value is not equal to the price or cost of the property as many people think. All the three are different. Cost refers to the expenditure on materials and labor; price is the amount paid by a buyer to the seller and value is the actual merit or worth of the piece of land. Cost and price cannot determine value but can affect the value factor. Land value can be either higher or lower than the price and cost.
- Appraisal – a land`s value goes higher and appreciates depending upon the changes in the neighborhood. And this is one form of income to the owner who realizes the potentials from his property only at the time of selling it to a different person.
These are some of the essential and predominant factors that affect the value of a property. It might be either all of them together or the happening of one of them that might badly hit or favor the property`s value.