Real estate is defined as a permanent structure or land, such as a home or home improvements on land, whether man-made or natural. Real estate is a kind of real property that differs from personal property. Personal property is something that isn’t permanently attached to the land and includes boats, vehicles, furniture and related equipment.Â
The term real estate, land and real property can be interchangeable however, there are some clear distinctions.
Land refers to the surface of the earth and upward to the air above and is made up of minerals, water and trees. While the physical attributes of land include its uniqueness and immobility.Â
Real estate encompasses the land mentioned above but also includes permanent man-made structures and additions to the land such as houses, complexes and buildings. Any changes made to the real estate to improve the value are referred to as improvements. Once land is improved upon, the capital and labour used to improve the area represents a sizable and fixed investment.Â
Real property includes land and additions on the land as well as the rights to inherent usage and ownership.Â
The Different Types of Real Estate
There are 5 primary categories when it comes to real estate and these are:
Residential Real Estate: This, as the name suggests, refers to any property that is used for residential purposes including family homes, townhouses, and cooperatives.
Commercial Real Estate: Refers to a property that is used exclusively for business such as hotels, offices, restaurants, shopping centers and apartment complexes.Â
Land Real Estate: This refers to property that is underdeveloped and includes vacant lands, ranches, farms and orchards.
Industrial Real Estate:This refers to properties that are used for production, storage, distribution, manufacturing and research.
Special Use Real Estate: This refers to property that is used by the public and includes government buildings, parks, cemeteries, schools, places of worship, and parks. Additionally, Operational Real Estate, which encompasses properties crucial for the day-to-day operations of businesses and organizations, such as data centers, healthcare facilities, and transportation hubs, can also be considered a subset of Special Use Real Estate.
How to Invest in Real Estate in the UK
Investing in property doesn’t necessarily mean that you have to buy a building or buildings. There are a variety of ways you can invest in real estate – be it directly or indirectly. Some of the most common ways you can invest in real estate include investment or rental properties, homeownership and even house flipping.Â
If you are interested in investing in property in the UK, then you can explore a wider investment portfolio to spread the risk. However, in order to do this successfully, you need to research, understand your options and of course, assess your finances.Â
Research your Real Estate Investment Options
As stated previously, property investment can be done in a variety of ways. The types of investments you can consider include:
Property development: This kind of investment refers to the purchase of real estate, be it land or property, with the intention of adding value to the real estate by renovating, refurbishing and/or extension in order to generate a positive return on investment.
Buy-to-let: This refers to buying a property to rent it out, rather than live in it. Most Buy to Let mortgages are interest only which means that the monthly repayments will only pay off the interest, not the amount owed on the mortgage.
Buying a new build off plan: Buying real estate off plans means buying a property that is still currently in development stages. What makes this a good investment is that the property has never been occupied before however, there is risk of not being able to fully see the end product when you make the purchase. This kind of investment is intense and requires you work with a developer who has a good reputation.
Investing in property abroad: If property in the UK isn’t something you are interested in, buying abroad is worth considering. By doing this, you are able to make an income by letting the property to holidaymakers while having your own place to visit on holidays when it’s not being rented up. If the value of the property goes up, you are also able to make a profit when you choose to sell.Â
Real estate investment trusts: REITs are companies that invest in real estate properties and make income through rentals. You are able to buy shares in these companies that can be traded on the stock market, and placed in a pool with other investors to invest in further property. REITs also pay out 90% of income to shareholders and come with tax benefits and they don’t have to pay capital gains tax or corporation tax, which makes for greater payouts.Â
Whichever type of real estate investment you select, you need to remember that property investing is rewarding but also comes with risk. This means it’s best to understand your finances before investing.Â
Property investment is a big decision and without the right risk assessments, can drain your finances as fast as it could give you returns. You need to make sure that you won’t be overreaching and won’t struggle should anything go wrong with the property or related finances. This is why you need to consider other types of property investments such as shares or even pooled funds. This offers a way to invest in real estate indirectly which comes with a lower initial outlay.Â
There are a variety of indirect ways to invest in real estate including:
Property open-ended investment companies: Allowing you to pool your money with other investors, in order to access assets that would be difficult to invest in on your own.Â
Shares in listed property companies: By placing shares in listed property, your personal liability and risk of loss becomes limited to the percentage share of ownership you have.Â
Peer-to-peer lending: Also referred to as P2B, peer-to-peer lending matches borrowers with a network of investors. Unlike a traditional lender, the investors you’re connected with can decide whether to fund your loan for a property.Â
These are just three examples of the indirect ways you are able to invest in real estate. With all of the above in mind, it’s vital to seek help from real estate professionals. Experienced real estate consultants are able to provide you with insight across a full spectrum of real estate options, guiding you on the path to real estate success. A real estate investment consultant gives investment and financial advice to those who want to buy, sell or invest in any kind of real estate property.
How Gerald Eve Can Help
Gerald Eve is a firm of chartered surveyors and property consultants based in the UK, operating from nine offices with over 600 professionals. As a Newmark company, the company offers expansive reach through a global platform. The company’s mantra is that everything it does is designed to help people reach their potential, be themselves and be supported in their professional and personal lives.
Gerald Eve is dedicated to providing its clients with exceptional real estate advisory services, offering long-term relationships above short-term transactions. With expertise that cover a variety of services, from corporate real estate advisory, asset management and real estate development to property management, building consultancy and valuation, the Gerald Eve team of real estate experts will give you the confidence to make better real estate investment decisions.
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