As a business, real estate involves buying, selling, and leasing property. Real estate

includes land, buildings, structures, and rights to natural resources. Real estate

brokers, agents, and investors use a number of methods to identify opportunities

and maximize returns on investment. Understanding how real estate works is a

critical step in building long-term success in the industry.

Real estate investments offer an attractive alternative to stocks and bonds. They

provide a steady income stream and have the potential to increase in value over

time. Additionally, real estate investments are often secured by tangible assets that

can be used as collateral. However, like any other type of investment, there are risks

involved. Fortunately, there are steps that can be taken to reduce those risks and

minimize losses.


The first step in the process of purchasing a piece of real estate is to locate property

that meets your needs. The easiest way to find available properties is by working

with a realtor. A real estate broker is licensed and certified by a state or national

association to help clients buy, sell, or lease property. Their responsibilities include

analyzing the market, conducting research, and assisting with the negotiation and

paperwork associated with real estate transactions. They are also responsible for

locating properties that meet their client’s specific needs, organizing tours and

walkthroughs, and helping clients with the purchase and closing process.


Once a property is found, the next step is to submit an offer. The seller will consider

the offer and either accept or reject it. If accepted, the seller and buyer will sign a

sales contract. The purchase price agreed upon may be above or below the listing

price of the property. In some markets, property prices rise rapidly as demand

outpaces supply. This is known as an inflation-hedging effect. Also read


Many people buy real estate as an investment, regardless of whether they plan to

live in it. Investors may purchase property for the purpose of renting it out, or they

might “flip” properties to capitalize on rising values. Other investors buy property

with the intention of renovating it and then reselling it.


One of the primary ways that real estate appreciates is through development.

Developers can build houses, apartments, or commercial buildings on land that was

previously undeveloped. Once these developments are completed, they can

command higher rents than vacant land. Moreover, developers can often earn extra

money by securing the right to harvest resources on raw land. This allows them to

receive royalties from the companies that harvest these materials.

Because real estate is less liquid than other forms of investment, it can be more

challenging for investors to make quick decisions. This is particularly true during

times of high volatility, such as the COVID-19 pandemic. As such, investors need to

have a strong understanding of how the market works and have strategies in place

to respond quickly when needed. To be successful, investors should also understand

how the real estate cycle works.