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When I started out in the real estate business many years ago, I knew practically nothing about what was involved. I was lucky to have a mentor, David Probinsky, who sat me down and took me through the basics. He explained that while each deal may be different, the overall elements in the buying and selling of property were usually the same. This chapter gives a simplified overview of the basics involved in the world of investment real estate. I will also cover the educational opportunities available.

What Is Real Estate?

Real estate consists of improved property. That means land with a building on it. Unimproved property refers to vacant land. Real estate is property that can't be picked up and moved, and this is what differentiates it from personal property. Think of a building as real estate and the furnishings in it as personal property.

Types of Income Properties

When you enter the commercial real estate arena, you'll find several types of income-producing properties from which to choose. You should examine your financial and family situation and think about the following: What kind of property investment will fulfill your needs? Do you have the money to invest? If not, do you know how to get it? (You will find out in Chapter 4 how easy it is to get the money.) Most income properties fall into the categories described in the following list.

Apartment complexes: Apartment buildings with five units or more are classified as commercial property. This type of property runs the range from small buildings with a few units to large complexes with hundreds of units.

Office buildings: Suburban office buildings are relatively small compared with large office buildings in downtown areas. Since the mid-1990s, a number of condominium office buildings have been constructed, and some rental office buildings have been converted to office condos.

Shopping centers: This refers to a collection of retail stores, either in an enclosed complex or side by side in a shopping mall. Many shopping centers have national chain tenants such as department stores, restaurants, electronics firms, sporting goods outlets, and supermarkets.

Retail strip stores: These are stores that sit among a lineup of other retail outlets, usually on a busy front street in a neighborhood or a downtown. A retail strip store is a space that may be used as a beauty salon, a florist shop, a luncheonette, or a shoe repair store, to name only a few possible options. Small shopping centers can also be considered retail strip stores.

Industrial properties: This real estate category includes flex space, which is a combination of office and warehouse facilities, and small bay warehouses. Factories and large distribution warehouses are also industrial properties.

Parking garages: Although municipalities and counties own some parking facilities, others are built and owned by private developers who recognize the need for parking in bustling areas.

Mobile home parks: These combine real estate and personal property. The land is real estate, but the mobile homes are personal property. Operating a mobile home park is a business, so, overall, it's a hybrid property.

Hotels and motels: These are hybrid types of properties because they combine real estate together with running a business.

What Real Estate Can Do for You

Individual investors approach real estate from different perspectives. What's good for one person may not be good for the next person. Some investors buy rental homes or small income properties to fix up and resell for a quick profit. Others want to invest in multiunit rental properties, with a plan to pay off the mortgages as soon as possible and then have substantial income flowing in for many years. Still others are interested in investing small amounts of cash and taking on big, long-term mortgages in order to leverage and maximize their cash flow. There are those who seek to buy freestanding buildings occupied by creditworthy national tenants – perhaps on a long-term triple net lease where the tenants pay every expense. And there are the flippers interested buying properties then quickly reselling them.