Real Estate is a term we use to refer to everything related to the land-property market, both in terms of renting and buying and selling homes, but also in terms of properties that are not residential in nature. But what exactly is Real Estate and how to invest in it?
What is the meaning of Real Estate investments?
This Anglo-Saxon term refers to all activities related to the supply and demand in all types of properties, whether for residential, commercial, industrial or urban use… And not only does it include the process of selling or renting these properties, but it also encompasses activities such as the development, investment and financing of construction projects. In other words, Real Estate includes all activities related to the acquisition or development of land or any permanent structures. Or to put it another way, all activities related to the purchase and sale of real assets.
Real Estate investment is a good option for those who have savings and wish to make the most of them. The real estate market has suffered a series of ups and downs over the years as a result of the economic crises and the COVID-19 hiatus, but the real estate sector has recovered and is now considered one of the most profitable and secure sectors in which to place one’s savings. Real estate investment is currently one of the best bets for savers and investors because it has a high profitability potential.
The 4 types of Real Estate
As we mentioned before, Real Estate includes both land and buildings, and even improvements made to a property. These are the four types of Real Estate:
- Land. The land is at the core of real estate and is inherent to all types of real assets. It plays an essential part in obtaining returns, as it can increase its value. Land can be used for residential, commercial or industrial purposes, as well as for livestock or agriculture.
- Residential. This refers to private properties that are intended for housing and are therefore not subject to any economic activity. This includes newly built and second-hand dwellings. In Spain, this type of property is where most investments are made.
- Commercial. This refers to buildings or premises that are destined to carry out an economic activity and, therefore, generate revenue. These include shops, offices, shopping centres, hotels, etc. Holiday dwellings could also be included in this group. This type of property, together with residential property, is the most sought-after when it comes to investment.
- Industrial. These are large properties such as industrial warehouses and factories that are used for production, distribution or storage operations. As a general rule, operations related to economic activities are carried out in these large properties.
How do real estate investments work?
Real Estate investment is regarded as a very safe and reliable investment, which makes it a good option for those who want to make the most of their savings and earn a return. There are several ways to invest in the real estate business, including the following:
- Direct purchase of real estate assets. This involves investing in a property that meets the requirements of the type of investment that the buyer wishes to make. In most cases, the transaction is dealt with directly with the owner, who must pay the price of the property in addition to other expenses derived from the sale and purchase.
- Buying through a real estate agency. The real estate consultancy is made up of experts who advise investors according to their interests. In this case, in addition to the price of the property and the associated costs, the corresponding fees will have to be paid to the consultancy.
- Listed Real Estate Investment Companies (SOCIMI). These are public limited companies listed on the real estate market. It is a type of fund in which transactions are carried out between large companies, with very low risk and high returns. The objective of these companies is the purchase, development and refurbishment of real estate, mainly to rent them out and make a profit. Investing in a Listed Real Estate Investment Company is simple -all you have to do is buy their shares, which are listed on the stock exchange, just as you would buy those of any other company.
- Investment funds. Through this investment method, investors participate in a portfolio made up of different assets in the real estate sector that are managed by a management company.
- Real estate crowdfunding. This is a new way of investing in the real estate sector that consists of the following: a company presents a project on a real estate crowdfunding platform (e.g. construction or renovation of housing), and the various investors contribute their money with the aim of financing these projects and thus obtaining a return.
If you want to invest in real estate and secure the profitability of your investment, at Sonneil we have different types of properties in highly sought-after coastal locations.