Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made—including water, trees, minerals, buildings, homes, fences, and bridges. A real estate is a form of real property. It differs from personal property, which are things not permanently attached to the land, such as vehicles, boats, jewelry, furniture, and farm equipment.
How the Real Estate Industry Works
Despite the magnitude and complexity of the real estate market, many people tend to think the industry consists merely of brokers and salespeople. However, millions of people in fact earn a living through real estate, not only in sales but also in appraisals, property management, financing, construction, development, counseling, education, and several other fields.
Many professionals and businesses—including accountants, architects, banks, title insurance companies, surveyors, and lawyers—also depend on the real estate industry.
Real estate is a class of “real property” that includes land and anything permanently attached to it, whether natural or man-made. There are five main categories of real estate: residential, commercial, industrial, raw land, and special use. You can invest in real estate directly by purchasing a home, rental property, or other property, or indirectly through a real estate investment trust (REIT).
Real property shouldn’t be confused with personal property, which encompasses all property that doesn’t fit the definition of real property. The primary characteristic of personal property is that it’s movable. Examples include vehicles, boats, furniture, clothing, and smartphones.
Physical Characteristics of Real Estate
The land has three physical characteristics that differentiate it from other assets in the economy:
- Immobility. While some parts of the land are removable and the topography can be altered, the geographic location of any parcel of land can never be changed.
- Indestructibility. The land is durable and indestructible (permanent).
- Uniqueness. No two parcels of land can be exactly the same. Even though they may share similarities, every parcel differs geographically.
Economic Characteristics of Real Estate
The land also has some distinct economic characteristics that influence its value as an investment:
- Scarcity: While the land isn’t considered rare, the total supply is fixed.
- Improvements: Any additions or a change to the land or a building that affects the property’s value is called an improvement. Improvements of a private nature (such as homes and fences) are referred to as improvements on the land. Improvements of a public nature (e.g., sidewalks and sewer systems) are called improvements to the land.
- The permanence of investment: Once land is improved, the total capital and labor used to build the improvement represent a sizable fixed investment. Even though a building can be razed, improvements like drainage, electricity, water and sewer systems tend to be permanent because they can’t be removed (or replaced) economically.
- Location or area preference. Location refers to people’s choices and tastes regarding a given area, based on factors like convenience, reputation, and history. Location is one of the most important economic characteristics of land (thus the saying, “location, location, location!”).
Types of Real Estate
There are five main types of real estate:
- Residential real estate: Any property used for residential purposes. Examples include single-family homes, condos, cooperatives, duplexes, townhouses, and multifamily residences with fewer than five individual units.
- Commercial real estate: Any property used exclusively for business purposes, such as apartment complexes, gas stations, grocery stores, hospitals, hotels, offices, parking facilities, restaurants, shopping centers, stores, and theaters.
- Industrial real estate: Any property used for manufacturing, production, distribution, storage, and research and development. Examples include factories, power plants, and warehouses.
- Land: Includes undeveloped property, vacant land, and agricultural land (farms, orchards, ranches, and timberland).
- Special purpose: Property used by the public, such as cemeteries, government buildings, libraries, parks, places of worship, and schools.
What is an example of real estate?
Vacant land and residential lots, plus the houses, outbuildings, decks, trees sewers, and fixtures within the boundaries of the property are examples of real estate. Furniture, cars, paintings, jewelry, and boats are examples of personal property rather than real estate.
Real estate is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals, or water; immovable property of this nature; an interest vested in this (also) an item of real property, (more generally) buildings or housing in general.
Real estate is different from personal property, which is not permanently attached to the land, such as vehicles, boats, jewelry, furniture, tools, and the rolling stock of a farm.
Again, this definition covers real estate at the highest level and differs from what most likely comes to mind when you hear the term, which is real estate as a business. In this guide, we’ll mainly focus on real estate as it refers to the profession of buying and selling property.
If you’re new to the industry or looking to get involved, this guide will be your go-to resource for all of the basics and real estate terms to know. We’ll break down the different types of real estate, job titles, and responsibilities, as well as the elements of the real estate process.