Real estate is property that includes land and the structures — such as houses, apartments, office buildings or warehouses — attached to it. It also encompasses the air above the land and underground rights below it. Investing in real estate can be a great way to earn income from rental properties or make financial gains as property values increase. However, it requires significant upfront capital and can take years to generate a return on investment. In addition, the real estate market can be quite volatile. To minimize risk, investors should understand what is real estate and how it works before making any investments.

Residential real estate is the most common type of real estate. It includes everything from single-family homes to multifamily apartment complexes. It also can include portable dwellings like houseboats. Most people purchase their residential real estate using a loan called a mortgage from a bank or private lender. Generally, you will need to meet certain qualifications, such as credit history and debt-toincome ratio, to be considered for a mortgage. Those who wish to invest in residential real estate typically do so because they want to rent out their homes or enjoy the financial benefits of owning an appreciating asset. Read more

Commercial real estate is used for business purposes and is generally intended to produce income. It can include retail shops, malls, offices and hospitals. It can also include land that is leased to industrial businesses, such as factories and mines. Commercial real estate can be very lucrative, but it is also risky. The profitability of a commercial property depends on how much it can be rented out and the strength of the local economy.

Raw land is land that hasn’t been developed and may not be suited for any functional use. Vacant land can be bought and held for future development or used for other purposes, such as grazing, farming or timberland. Raw land can also be purchased for recreational purposes or as a hunting area.

An investor in residential real estate can use his or her home as collateral for a mortgage. This type of investment can be an excellent way to build equity and avoid having to pay interest on a loan. However, if the value of your home declines, you may have to sell it at a loss to repay the loan.

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Purchasing investment real estate typically requires substantial upfront capital and debt from banks or private lenders. Because of this, few people purchase investment property with cash. Most will need to secure a mortgage from a bank or other private lender, which is known as a real estate loan or REIT loan.

Many people who own investment real estate hire a company to manage their properties. A property management company can help with things like landscaping, maintenance and security. They can also screen tenants and handle tenant issues. For example, if a tenant’s furnace breaks down, the property manager will notify the tenant and send out a repairman. In some cases, the property manager can even handle evictions if necessary.