What is Real Estate

Real estate is a legal term that describes a piece of land, including any natural or man-made features that are permanently affixed. These features can include ponds, streams, lakes, trees, and mineral rights. The mineral rights can be sold separate from the real estate property itself.

Real property is a somewhat broader term that also encompasses the legal rights attached to the real estate and the ability to possess, sell, lease, own, and enjoy the benefits of the land.

Real estate does not include movable property that is simply on the land, such as cars or even the seasonal harvest of a crop. Movable property located on the land falls under the rights of personal property.

5 Tips When Creating the Perfect Real Estate Property

Real estate is an investment that can pay for itself if you plan out your investments. Many people fail to do their homework and jump into real estate blindfolded just because they like a property.

They may like some of the features, but at the end of the day it is wise to pass up opportunities that don't make dollars and sense. Let's consider the top 5 tips for creating the perfect real estate property below:

#1: Consider the 1% Rule

The %1 rule is a rule that limits viable investments strictly to properties that demonstrate the potential to earn %1 of the total cost in monthly rent. This means that 100 months of renting out the property at the going market rate for the area will pay for the entire home or apartment.

If the property doesn't fit this formula, then the valuation is not supported by the market. This does not necessarily mean that you can pay off the property in 100 months if you consider that upkeep can increase the overall costs.

#2: Follow Market Trends

When you are investing in a property, you want to make sure that the market is trending in your favor. Analyze the market trends in a particular area to estimate the expected demand for housing and potential for profit. Consider the styles of housing that are fetching the most money locally and nationwide.

Prices for housing tend to accelerate in areas with access to quality amenities, low crime, and a hub of transportation options allow for competition in a particular area. Purchasing property that is too close to the decay of urban sprawl can make your investment less attractive even if it is not a high-crime area just yet.

#3: Consider Tax Laws

Many states, such as New York, keep increasing the tax rates on homes to pay for public services. Many of these public services are to fight the inevitable decay of drug trafficking and violent crime. 

There are no states that are completely without property taxes. However, property taxes are 7 times higher in New Jersey than in Hawaii, for example. It makes sense to shop around if you have that option.

#4: Buy Turn-Key Properties

Just like with automobiles, preventative home maintenance is important. It costs a minimal amount to change the oil on a car but can cost thousands to repair the damage if you don't. A home can, likewise, fall into disrepair that takes a serious toll on its value from owner neglect.

It is a good idea to avoid fixer-uppers unless you work in construction and plan on taking on the project by yourself. If you buy turn-key properties that are well taken care of and in excellent condition, the chance of surprise repairs is reduced. It can be difficult to assess the totality of defects in a home after fall into disrepair. Avoid money pits by passing on homes with too many unknown factors.

#5: Evaluate Bathrooms & Kitchens

Any realtor will tell you that bathrooms and kitchens sell homes. These high-function areas of a home add the most value and are the most important aspect of your investment. Ensuring that the property has modern appliances and quality bathroom components with good finishing details can make a big difference in its long-term value.

What Not to Do in Real Estate 

Don't Blow Your Budget

Real estate investments can be made nowadays without even owning a property. You can buy partial ownership of a property or collection of properties using crowdsource funding. 

Avoid Extreme Weather Investments

Avoid properties in areas that experience extreme weather. The risks of damage from flash flooding, tornadoes, hurricanes, and earthquakes are an unknown factor that can seriously undermine your investment.

Written by Taylor McKnight, Author for Home Sweet Home Real Estate