Real Estate

Real estate is an encompassing term that refers to land, the buildings on that land, and its natural resources, such as crops and minerals.

Real estate can be grouped into three broad categories: residential, commercial and industrial.

Residential real estate includes houses, condominiums, townhomes and undeveloped land. Home ownership is the most common type of real estate investment in the United States. About two-thirds of U.S. residents own their home.

Mortgages can have fixed or variable rates. Fixed-rate mortgages are usually more expensive in the short term, but they spare owners from the shock of future rate hikes.

Commercial real estate includes office, warehouse and retail store buildings. It’s different from residential real estate in that its leases are generally shorter and its down payments are usually larger. Commercial real estate returns are based on their profitability per square foot, unlike residential real estate.

Industrial real estate includes factories, mines and farms.

Unlike other investments, the immediate area where a property is located can dramatically impact its value. Factors such as jobs, crime rates, school quality and property taxes weigh heavily into property values.

Real estate profits – and losses – come from rent and property appreciation. Many small investors increase their wealth by investing in rental properties. Commercial real estate is often more valuable than residential properties, and it tends to be more tightly regulated.