So you want to know the origin story of real estate, it’s definition, and its etymology. You’ve come to the right place! In the article you’re about to read, I’ll break down the real estate meaning, where it comes from, and why it’s called real estate to begin with.
What is the Real Estate Meaning?
Before we get into real estate’s meaning, lets see the context of the word’s etymology. Real estate became a legal term to identify a royal grant of estate land. The term “real estate” is first recorded in the 1660s, so we find its etymological origins in Early Modern English.
The word “real” is derived from Latin, meaning existing, actual, or genuine. The word “estate” is an English translation of the Old French word “estat,” meaning status. Now, estate is the word we use to describe owned property consisting of houses or land. It is a comprehensive version of one’s property that consists of real estate.
Fun Fact: In many countries, real-estate brokers and realtors are also called “land agents.”
What is the definition of Real Estate?
Here’s an example to help you understand real estate’s meaning-
If you own a plot of land, even with nothing on it, by definition, that is real estate. If you own an apartment complex, by definition, the building and the land it is on is the real estate.
In legal terms, the meaning of real estate is property and all of its “real” and “fixed” components. Portable and personal property do not count as real estate even if it is on a real estate property.
What parts of a property aren’t considered real estate?
Permanent improvements and features inseparable from the land, natural or man made, are defined as a part of the real estate. Fences, gardens, driveways, sheds, garages, and other kinds of permanent features count as a part of the “real property.” Also, streams, trees,
Personal property can be on real estate, but is not considered a part of it. Personal property is anything that is not permanently attached to the land. This includes furniture, vehicles, farm equipment, and the like.
If you visit a home that is furnished and you intend to buy, expect that the furniture is not a part of the deal. If you’re buying a farm from a landowner and think the tractor or the animals are a part of the deal you’d better talk to that farmer about it before signing any paperwork.
Does “realty” mean the same thing as “real estate?”
Although you may sound outdated, yes, officially realty has the same definition and grammatical uses as real estate. These terms can be used interchangeably to describe the same thing.
Currently, the word realty is synonymous with real estate, but it is more commonly used to describe services rendered from a real estate agent. There is no official re-defining of the word yet, but we may see that change in the future.
What is a Real Estate Agent?
A real estate agent is a person who aids people in buying and selling real estate like homes, land, and city buildings.
A real estate agent is an expert in the real estate market and is typically well versed in the real estate market trends. They are fluent in the legalities around buying and selling property.
They take your real estate investment seriously, so they are often the best consult for anyone who is unclear on what they should do to legally protect themselves as a buyer or seller of real estate. This means that you can expect quality help from your agent.
Why is Real Estate Considered an Investment?
Real estate is a rare type of investment that you actually get to live in! Owning real estate offers major financial incentives which investors have made careers from utilizing.
Even if you’re not a real estate investor, buying real estate could be one of the smartest investments you make.
Mainly, real estate means investing because your home will appreciate value over time, build your equity, and help you benefit from specific tax laws.
If you buy a new vehicle for $30,000, after a few years the resale value of that vehicle will be less than half of what you bought it for.
That is not the case with real estate- real estate actually appreciates over time, 4% average per year in the United States. That means If you buy a $300,000 home today, your home will appreciate $6,600 in the first year, then $6,750 in the second year. After 10 years, your home will be valued at $444,750.
Beyond appreciating value, you benefit from a number of tax breaks while building equity. You are receiving competitive risk-adjusted returns, and your investment is hedged against inflation. It’s also a great way to diversify your investment portfolio.
What is a Real Estate Business?
Real estate business is one of the biggest, most lucrative businesses. It can be broadly categorized into four main categories: commercial, residential, industrial, and land. A real estate business can operate in all of these categories, or just one or two.
A real estate business, is made up of:
- Material supplier
- Building Labor Supplier
- Equipment provider
- Or a Home Realtor
All of these professionals come together to create and establish the vibrant real estate business.
One especially key attribute of real estate businesses are the real estate agents and brokers who handle clients in the transaction processes providing advice, information, arranging property tours and helping to negotiate deals.
Why is Real Estate Business Considered an Investment?
Real estate is the biggest capital investment you can make and it’s highly cash flow dependent.
Risk management is the biggest obstacle that an investor needs to manage. Management and evaluation of risk is the main element of any successful real estate investment strategy. Risks can occur in many different ways at any stage of the investment process.
What Typical Real Estate Businesses Acquire as Investment Properties:
- Market listings (through a Multiple Listing Service or Commercial Information Exchange)
- Real estate agents and Real estate brokers
- Banks (such as bank real estate owned departments for REO’s and short sales)
- Government entities (such as government agencies)
- Public auction (foreclosure sales, estate sales, etc.)
- Private sales (transactions for sale by owner)
- Real estate wholesalers and investors (flipping)
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