Introduction to The Real Estate Business

1 

INTRODUCTION TO THE REAL ESTATE BUSINESS 

Real estate activities Professional specialties Property type specialization 

Why hire a real estate professional 

In its broadest sense, the real estate industry is the largest single industry in the American economy. Within it one might include the construction industry, itself often considered our country’s largest business. In addition, the real estate industry may be said to include the creation, management, and demolition of every residence and business facility in the nation: offices, warehouses, factories, stores, and special purpose buildings such as hospitals and government facilities. The real estate business would include as well the managing of all the 8 Principles of Real Estate Practice in Florida 

undeveloped land in the country: national parks, forests, and the vast quantity of unused federal property. 

Real estate professionals are individuals and business organizations whose sole enterprise is performing a real estate-related service or function. A wide range of professions is available to persons wishing to enter the real estate business. 

Real estate 

activities Real estate professionals perform the following property-related functions: 

 creation and improvement 

 management and maintenance 

 demolition 

 investment ownership 

 regulation 

 transfer 

Creation and improvement. Creating real properties from raw land involves capital formation, financing, construction contracting, and regulatory approvals. The key parties involved in this aspect of the business are generally the developer, the landowner, and the mortgage lender. Also involved are market analysts, architects, engineers, space planners, interior designers, and construction subcontractors. 

Experts who manage the legal aspects of the development project include real estate attorneys, title companies, surveyors, property insurance companies, and government regulatory officials. The brokerage community, with the assistance of professional appraisers, usually handles the ownership and leasing transactions that occur over the many phases of development. 

Management and maintenance. All real estate, whether raw land or improved property, must be managed and maintained. The two principal types of managers are property managers and asset managers. Property managers and their staff oversee specific properties on behalf of the owners, making sure the condition of the property and its financial performance meet specific standards. 

Community association managers (CAMs) manage such residential properties as mobile home parks, planned unit developments (PUDs), cooperatives, time-shares, condominiums, and homeowners’ associations. 

Asset managers oversee groups of properties, or portfolios. Their role is to achieve the investment objectives of the owners as opposed to managing day-to-day operations. 

The scope of management work is detailed in a management agreement. 

Maintenance personnel include engineers, systems technicians, janitorial staff, and other employees needed to maintain the property’s condition. Section 1: Course Overview: The Real Estate Business 9 

Demolition. Demolition experts in conjunction with excavation and debris removal experts serve to remove properties that are no longer economically viable from the market. 

Investment ownership. A specialized niche in the real estate business is the real estate investor who risks capital in order to buy, hold, and sell real properties. In contrast to property owners whose primary interest is in some other business, the real estate investor focuses on identifying and exploiting real estate investment opportunities for profit. The real estate investor provides capital and liquidity to the real estate market. 

Regulation. All real estate is to some degree regulated by government. The principal areas of regulation are usage, taxation, and housing administration. Professional regulatory functions include public planners, zoning administrators, building inspectors, assessors, and administrators of specific federal statutes such as Federal Fair Housing Laws. 

Transfer. Rights and interests in real estate can be bought, sold, assigned, leased, exchanged, inherited, or otherwise transferred from one owner to another. Real estate brokers and the brokers’ associates are generally centrally involved in such transfers. Other professional participants are mortgage brokers, mortgage bankers, appraisers, insurers, and title companies. 10 Principles of Real Estate Practice in Florida 

Professional 

specialties In summary, the six primary functional areas are populated by professionals with the following specialties. 

Professions in Real Estate 

Creating developers market analysts 

public and private planners surveyors 

architects engineers 

building contractors public and private inspectors 

space planners mortgage brokers 

mortgage lenders and bankers securities companies 

title and escrow companies attorneys 

insurers appraisers 

real estate brokers and agents 

Managing & 

Maintaining property managers asset managers 

maintenance engineers maintenance technicians corporate managers 

Destroying demolition contractors excavators 

Holding investors corporate managers 

Regulating assessors public planners 

zoning administrators building inspectors 

Transferring brokers and agents appraisers 

lenders and bankers mortgage brokers 

title and escrow companies attorneys 

insurers surveyors 

Property type 

specialization In addition to specializing by function, many professionals also specialize in the type of property they work with. According to the purpose of ownership, properties are classified as residential, commercial, or investment properties. 

Residential property refers to property that is owned and used for habitation. Such properties may be further classified in terms of how many families they are designed to house, whether they are attached to other units or detached, and so forth. 

Commercial property generally refers to retail and office properties, but may also include industrial real estate. The term “commercial” relates to the fact that the property can potentially generate income from a business’s usage. 

Investment property refers to any property that is held by its owners for investment purposes. All classifications of property may be investment properties. Generally, however, the term does not refer to owner-occupied residences, even though such properties constitute an investment. Apartments, condominiums, cooperatives, and single-family homes may be considered as investment property if non-occupants own the property for investment purposes. These properties are also referred to as residential income properties. Section 1: Course Overview: The Real Estate Business 11 

According to use, the following classifications of real properties are commonly accepted. 

Classifications of Real Estate by Use 

residential industrial 

residential income farm and ranch 

office special purpose 

retail land 

These categories often have overlapping uses. A bank, for example, may have retail as well as office operations. An industrial distribution facility may include extensive office space. A retail center may contain offices. 

Special purpose properties include publicly or privately owned recreational facilities, government buildings, churches and schools. 

Why hire a real 

estate professional There are many reasons a member of the public hires a real estate professional. The real estate professional offers expert information on the real estate market, specifically in the areas of: 

 property transfer 

The real estate professional knows how to transfer real property and who needs to be involved in transferring the property legally. 

 market conditions 

The real estate professional understands the current economic market conditions and the current local real estate market. 

 how to market real estate 

The real estate professional understands the best way to advertise and/or promote a specific piece of real property depending on the audience that may buy the property.