Commercial real estate is a major area of business devoted to the buying and selling of land and properties. Since purchasing realty entails a significant investment, it is closely related to other business fields such as finance and banking. We are going to attempt an overview of these three specific areas. Realty can be divided into several different types, including appraisal, brokerages, development, net leasing, property management, real estate marketing, real estate investment, relocation services and corporate real estate.
Appraisal consists of assessing the market value of a property, depending of the characteristics of said property, like location for example. Brokerage is done by brokers or agents and is basically the search for sellers and buyers of property. The agent acts as middle man between the former and the latter. Development includes the renovation and re-lease of existing properties, as well as the purchase of raw land and the sale of improved plots. Real estate development is not the same as construction. Net leasing refers to the payment, in addition to rent, of expenses like real estate taxes, insurance, maintenance, repairs, utilities and others, by the tenant. Property management is similar to management in any other business, only applied to commercial, industrial or residential real estate. Real estate investment implies purchasing, owning, managing, renting and/or selling realty to make a profit. Corporate real estate is that used by a business venture for its own purposes.
The main types of physical property in the U.S. and Europe are attached-multi unit dwellings such as apartments, multi-family houses, terraced houses, condominiums and cooperatives; semi-detached dwellings like duplexes; and single family detached homes like mobile homes, houseboats and tents. The size of a property can be defined in square feet or meters. In the U.S., this includes the “living space” area, excluding the garage and other non-living spaces. The number of square meters of a house in Europe may report the total area of the walls enclosing the home, thus including any attached garage and non-living spaces, which makes it important to enquire what kind of surface definition has been used. It can also be described more broadly by the number of rooms. A studio apartment has one bedroom with no living room. A single-bedroom apartment has a living or dining room separate from the bedroom. Larger units with two, three or more bedrooms are common.
As stated before, real estate investment requires capital. A way to obtain capital is through finance. This science is divided into business finance, personal finance and commercial finance, and it may include both saving and lending money. Business finance is the area of finance dealing with financial decisions that companies make and the tools and analysis used to make these decisions. The main objective of business finance is to increase corporate value while managing the company’s financial risks. The concepts of business finance and corporate financier are also associated with investment banking. The usual role of an investment bank is to assess the company’s financial needs and raise the appropriate type of capital that best suits those needs. Therefore, the terms business finance and corporate financier may be related to transactions in which funds are raised in order to create, develop, grow or acquire businesses.
Personal finance is defined as the application of the principles of finance to the monetary decisions of an individual or a family. It focuses on the ways in which individuals or families obtain, budget, save, and spend money over time, considering several financial risks and future life events. Elements of personal finance might include checking and savings accounts, credit cards and consumer loans, investments in the stock market, retirement plans, social security benefits, insurance policies, income tax management and real estate. Planning is an important factor in personal finance, usually involving assessment, setting goals, creating a plan, execution and monitoring and reassessment.
Public finance is the area of economics involved with paying for collective or governmental activities, and with the management and design of those activities. The field is frequently broken down into questions of what the government or collective organizations should do or are doing, and questions of how to pay for such activities. The wider concept, public economics, and the narrower term, government finance, are also regularly used.
Banking is another way of raising capital to invest in realty. As we all know, a bank is a financial entity that accepts deposits and channels those deposits into lending activities, either directly or through capital markets. A bank brings customers with capital deficits and customers with capital surpluses together. Banking is by and large a greatly regulated industry, and government restrictions on financial activities by banks have varied over time and location. The contemporary set of global bank capital standards are called Basel II. In some countries like Germany, banks have historically owned major stakes in industrial corporations while in other countries such as the United States banks are forbidden from owning non-financial companies. In Japan, banks are typically the connection of a cross-share holding entity known as the keiretsu. In Iceland banks had very light regulation before the 2008 collapse. Banks can help with real estate aspects such as mortgages and loans.