What Constitutes Real Estate? Exploring the Basics

Whether it’s a towering skyscraper or an ordinary suburban home, every piece of real estate starts as an idea. It then goes through a rigorous process before it becomes tangible.

Real Estate

Real estate consists of land and anything permanently attached to it, including buildings and natural resources like crops or minerals. Residential real estate can be leased to earn income or sold for profit, while commercial real estate is used to operate businesses. Contact Savannah Real Estate for professional help.

Real estate is an investment that encompasses land, and any permanent man-made additions on it like buildings. It is different from personal property, which consists of movable items like cars and boats. Real estate also comes bundled with inherent rights that owners can use, sell, and pass on as they see fit.

Land is the earth’s surface, including the ground and the airspace above it. It contains natural components like trees and minerals, as well as water sources and other resources. Moreover, each piece of land is unique and has its own geographical characteristics.

The most common uses of land are for residential, commercial and industrial purposes. Residential real estate includes single-family homes, condominiums, townhouses, and duplexes. Investors often buy these properties to earn rental income, which can be lucrative over the long-term. Commercial real estate includes retail and office spaces. It can also include warehouses and shopping malls. Vacant land, on the other hand, is undeveloped land that can be used for future development.

Many real estate investors purchase raw land in prime locations with the intention of developing it into a profitable business. This type of land offers immense earning potential, and its value continues to rise over time. However, purchasing and maintaining land requires careful planning to ensure a successful outcome. A real estate broker or agent can help with the process. They can negotiate the terms of a sale and provide advice on financing options. Besides, they can also help find and evaluate tenants. Besides, they can provide legal services to protect the interests of buyers and sellers. The role of the real estate industry is vital for a healthy economy, as it provides essential needs like housing and workplaces. It also creates jobs and contributes to GDP.

Buildings

Real estate is divided into categories based on use, such as residential, commercial or industrial. Residential properties include structures reserved for human habitation, like houses and apartments. Multifamily property includes buildings with five or more units owned by a single entity and offered for lease rental, condominium or co-op ownership. Commercial and industrial properties are intended for business use, such as retail stores, restaurants and warehouses.

A growing trend in CRE is repurposing old buildings for new purposes. For example, a company may purchase a former church or school and convert it into an apartment complex. This type of repurposing can help revitalize urban areas, and it can also preserve historical sites.

There are a variety of different property types, and each has its own unique characteristics. For instance, office buildings can range from single-story suburban structures to high-rise offices in downtown cities. This asset class can be lucrative, but waning in-office attendance is creating headwinds for office investors. Retail property includes buildings that offer goods and services to customers, including malls and stores.

Structures

Whether you invest in commercial real estate or have other assets, it’s important to understand how your property ownership is structured. The right structure can protect your wealth from liability and unnecessary taxes, allowing you to achieve your financial goals while reducing risk.

Real estate investing is a complicated endeavor that involves complex legal and tax rules. That’s why working with a team of trusted advisors is critical to make sure your investment strategy aligns with your goals.

Investors can choose to form a limited liability company (LLC) or operate as a sole proprietorship or partnership. The choice of business structure is a personal decision and will depend on your financial goals, risk tolerance, and level of involvement in the property. Sole-ownership investments qualify for a 1031 exchange, but come with the added burden of direct control and responsibility for the property.

Commercial real estate includes a variety of asset classes, including office buildings, retail properties, multifamily housing, industrial buildings, and hotel/casino buildings. Each class has its own specifics, requiring specialized expertise in the asset type.

One of the most common structures is a joint venture (JV). A JV is an agreement between two or more parties to pool their resources for a specific task. In a CRE deal, the JV is typically used to purchase and manage a commercial real estate asset.

Another popular real estate investment structure is a Delaware Statutory Trust, also known as a DST. A DST is a separate legal entity that allows investors to co-invest with sponsors into a single asset or across a portfolio of properties. The DST has gained popularity recently as a replacement for Tenants in Common (“TIC”) investments and offers some distinct advantages to both sponsors and investors.

Rights of Possession

Real property ownership comes with a bundle of rights. These include the right to possession, the right of control, the right of exclusion, the right of enjoyment and the right of disposition. These rights must be balanced against the other individuals and entities with a claim to the property as well as the laws of the land. Ownership is a powerful concept and one that is important for everyone to understand as it impacts many aspects of our everyday lives.

For example, it is possible for a neighbor to gain legal title over a small portion of your property through a legal process known as adverse possession. This occurs when the disseisor, who is claiming the property, can demonstrate they have been in hostile and open use of the land for a specified statutory period of time. The disseisor also needs to show there is no existing agreement with the landowner or license to possess the property such as a written easement or a deed.

In order to maintain your right of possession it is important that you know your boundaries and keep up with regular inspections of your property. This can help to prevent neighbors from claiming parts of your land through a claim of adverse possession. Adverse possession claims can be difficult to prove as you must meet a long list of requirements in order for a court to accept your claim. For this reason, it is always wise to have an experienced real estate attorney on your side when dealing with any real property issues.

Rights of Enjoyment

The right of enjoyment is the legal term associated with real estate that gives property holders the right to use their land or property without interference. The term includes the right to exclude others from the property unless permitted by law, the right to peace and privacy and the right to basic utilities. The right of enjoyment is typically protected by an implied covenant in most lease agreements and state laws. Landlords are responsible for upholding the right of quiet enjoyment in leased spaces, and failure to do so can lead to lawsuits.

Tenants can also invoke the right of quiet enjoyment when a landlord fails to resolve nuisances that deprive them of their ability to enjoy their space, such as rodent infestations or leaky roofs. Landlords must be responsive to tenant concerns and work to minimize disruption during renovations. For example, offering alternative amenities or services can help minimize the impact of an upcoming renovation on tenants.

Another key aspect of the right of enjoyment is that a tenant can’t be disturbed in the case of a title action, such as when the property is sold. This applies to both residential and commercial properties. This can cause a lot of stress for tenants, especially in the middle of a lease.

As long as the titleholder has a valid title and meets local land use laws, they have the right to do what they want with their property. This could include building a house, renting it or even throwing a party, as long as it doesn’t violate local noise ordinances. The right of disposition is the legal right to sell or will a piece of property, but it can be limited by other factors, such as a mortgage lien.

James Stadler