Home Real Estate Business

Home Real Estate Business is a part of the as a whole real estate business.In Latin, the word “real†means matter or thing.Real Estate is basically a immovable property comprising of land, buildings and other things attached permanently to them. It is also known as Realty or Real Property. Anything that is not affixed with land and buildings (like furnitures) are called .

In USA, Real Estate Business is one of the major economic activities. There are mainly two types of Real Estates :-
Home or Residential Real Estate
When a land or building is put to sale or rental to families or individuals, then it is known as Residential Real Estate

Business.

Commercial Real Estate
Industries involved in the business of commercial (ie. Non-residential) component of real estate are known as Commercial real Estate. It includes building up of offices, retail space, industrial premises, hotels, malls etc.

Real Estate Business is one of the major business activities in the developed countries. Real Estate business in the developed countries accounted for $62 trillion at the end of 2002 among which residential real estate’s contribution is $48 trillion and that of commercial is $14 trillion. According to the census of USA in the year 2000 the number of housing units occupied were 105million.

Real Estate Business is a booming industry in both developed and developing countries. Now-a-days it is an area with high investment opportunities.

Real Estate Business has also its highs and lows. It also has a cycle with booms and recessions. So a investment in real estate business always demands proper and thorough research.

Investing in real estate business has two additional forms :-

(a) Foreclosure Investment To buy property from such a owner who is passing through a period of financial doldrums. This helps the buyer to make a deal which is cheap.

(b) No money down real estate investment It is a special service given by many real estate agencies where people can make real estate investment without any verifications of credits and employment.

Real Estate business can be a profitable one if the following rules are followed :-

Comparison of investments
Optimization of the structure of the deal
Minimization of risk
Maximization of return

Residential Real Estate is also called as Home Real Estate. It consists of single family homes, houses in towns, condominiums, etc. Home Real Estate Business includes those industries which mainly invest in the residential (non commercial) domain of the real estate including rentals.

The value of a home real estate can be appreciated in the following ways :-

1.Rental IncomeA home or residential property which is properly selected and managed can become a source of steady income through rental income.

2. Appreciation of Value

It has been historically seen that with time the value of the home real estate increases. Hence, from the long term perspective the value of a home real estate establishment appreciates.

3. Value appreciation through improvement of property

If improvement is done on the home real estate then it is most likely to enhance the price and profit at the time of sale.

4. Inflation helps in real estate’s value addition

Inflation drives up the rent of the home real estate leading to increased rental income.Growth in population in the urban areas (mainly through migration) create excess demand leading to upward trend in the rent prices.

5. Equity Home Loan can be utilized in profitable avenues

Mortgage payment leads to increase in equity. Thus, equity home loan can be used by a real estate investor for more investments and other purposes.

In USA, home real estate business is highly regulated. Law has given additional protection to the buyers of home real estates. A seller is required to fill up a truth-in-housing statement and is bound to disclose any type of default with the house. If there is any avoidance of these particulars then the buyer is entitled to sue the seller on fraudulent charges.

Buyer of a home real estate requires to obtain a mortgage from a lending institution. The lending institution in-turn receives a security interest. This means that in case of any default the institution is entitled to receive the title of the property and could clear the mortgage debt by selling the property.

In developed countries, the lending system is very much streamlined. In those countries the main source of capital for a home buyer is mortgage loan. Banks and lending institutions also offer mortgage loans to the buyers at favorable rates. In case of loan default the lending institution can foreclose, sell the property and use the proceed for paying off the debt.

Home real estate has turned into an important area of business and generally involves heavy investments. Hence specialists are required to evaluate the investment opportunity and facilitate the transaction. Some of the specialists are :-

(a) Home Real Estate Brokers

They assist and facilitate the transaction of the buyers and sellers of the home real estates.

(b) Home Real estate Appraisers

They give the service of doing the valuation of the real estate venture.

(c) Developer

They help to improve the land through addition and replacement of buildings.

(d) Property manager

They manage a property on behalf of the owner of the property.

(e) Real Estate Manager

They help in sales of home real estate business.

Some of the definitions related to Home Real Estate Business are :-

Duplex It is a real estate structure having two living spaces with a common wall.

Gross Potential Income(GPI) or Gross Scheduled Income(GSI)
It is measured as the gross income without taking into consideration the losses incurred due to vacancy or non-payment.
Gross Operating Income(GPI) or Effective Gross Income(EGI)

Gross Operating Income = (Gross Potential Income from a property) –
         (Losses incurred from Credit and vacancy)

Net Operating Income(NOP)

Net Operating Income = (Rental Income from a property) – (Operating
           expenses like interest payments and depreciation)