Real estate is both a term and an industry. The formal definition of the words “real estate” is “property consisting of land or buildings.” The term also refers to the entire industry that deals with the buying and selling of properties. There are several types of professionals who work in real estate. Real estate agents broker homes for buyers and sellers. Landlords buy houses or buildings and rent them to tenants — they might also buy commercial property and rent retail or office space to business owners. There are also subcategories of the real estate industry. Appraisers evaluate properties for buyers, sellers, and banks. Building managers handle rental units and maintain buildings for owners.

People buy land to sell to others or develop by building homes, office buildings, or other structures. Some will keep the property with the structure for business or personal use, while others will sell it once they finish construction. The five major types of real estate include land, residential, commercial, industrial, and mixed-use. Residential real estate typically means 1-4 unit dwelling structures, but some also refer to huge multi-family buildings as residential. Commercial includes office buildings, stores, hotels, or any structure used for business purposes. Industrial real estate generally refers to manufacturing, warehousing, and research facilities. Mixed-use is when a property combines two of the real estate types. For example, a warehouse with a storefront is a mix of commercial and industrial. Some consider special use properties as a sixth type of real estate. Special use consists of atypical land or structures, such as government buildings, parks, or cemeteries.

The economic characteristics of real estate include location, improvements, usefulness, scarcity, and demand. A property’s location plays a vital role in its value. Houses in a quiet neighborhood are typically worth more than a home close to a freeway. Improvements are anything added to a piece of land, including utilities and structures. The nature of the improvements and their condition will help determine its value. The more useful a property is, the more it’s worth. For example, a restaurant that seats 50 patrons has more value than one that only seats 15. When land or homes are scarce in a particular area, they will fetch a higher price because buyers don’t have that many options. If there is plenty of supply, sellers might have to lower their expectations. The same is true with demand. Homes in desirable areas are often more expensive because many potential buyers want the property. In towns where business owners need storage, warehousing space might be costly.