REAL ESTATE INVESTOR
ANTHONY LESTER FRESNO Real Estate Investing for Beginners – Real Estate 101
Real estate accounts for 60% of the world’s mainstream assets — and a significant portion of all national, corporate and personal wealth. With that in mind, real estate investing clearly deserves consideration from any individual or business looking for asset classes in which to invest a portion of their capital. 1 But before you can make informed decisions about whether or not to invest in real estate, and which of the many types of real estate might make the most sense for you, you first need to understand real estate investing basics. This page is designed to provide you with a broad introduction to real estate investing, beginning by answering a question that few people and even some seasoned real estate investors cannot fully answer: What is real estate? (Note: If you are looking for an advanced-level discussion of real estate investing in general, or real estate crowdfunding in particular, we suggest you visit our Resource Center for a wealth of informative articles and web pages on these topics.)
WHAT IS REAL ESTATE? When they hear the term real estate, many people think of land, or homes, or other types of buildings and structures. Those are components of real estate, but they are far from a complete definition. Here is how the Uniform Standards of Professional Appraisal Practice (USPAP), the industry guidebook for real estate appraisers, defines real estate: “An identified parcel or tract of land, including improvements, if any.” That reference to improvements is key to your understanding of real estate, because it underscores the fact that real estate also includes anything fixed or permanently attached to the land — a far broader category than most people realize. Improvements, as understood in the real estate context, can include a home, store, office building or other type of structure built on the land. But it can also refer to anything else permanently affixed to that property, including fences, roads, streams, trees and even the utility systems on the land. Finally, real estate can also include several rights inherent to a piece of property — such as air rights, water rights and the mineral rights to any natural resources in the ground under the land. This is why USPAP also includes a definition in its guidebook for real property, which it explains is often used interchangeably with real estate. USPAP defines real property as “The interests, benefits, and rights inherent in the ownership of real estate.” 2
WHAT IS A REAL ESTATE INVESTOR? With that all-inclusive definition of real estate in mind, we can now define a real estate investor as an individual (or business or other entity) investing in the real estate market by purchasing, leasing or otherwise acquiring rights to a piece of real estate or any of the rights inherent in a piece of real estate.
WHAT ARE THE POTENTIAL BENEFITS OF REAL ESTATE INVESTING?
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Although no type of investment can offer a guarantee of a profit or even protection of the principal, historically real estate has been one of the safest asset classes for investors, while at the same time offering potential for gains. Real estate investing offers several possible benefits generally not associated with other types of investments. Here are just a few of those benefits.