Key concepts to understand the real estate sector

What exactly is the real estate sector? If we understand it as a real estate market, we could say that it deals with the mere supply and demand of real estate. However, this definition is insufficient if we analyze the variety of economic activities that can be carried out around a property, beyond the transaction generated by supply and demand. According to the business activity carried out, we can differentiate the following categories in the sector:

Promotion:

Among the real estate activities usually developed in the market by entrepreneurs and commercial companies we can highlight the purchase of land and buildings for urbanization, subdivision, construction and / or rehabilitation, either directly or through third parties, for subsequent sale. It is what we know as real estate development. 

Investment:

We can define real estate investments as those investments in real estate (land or buildings) made by companies or individuals in order to obtain income over time and / or with a view to receiving a profit through subsequent sale, the yield obtained being through them independent to the usual activity of the company or the person.

Financing:

The concept of real estate financing includes all types of financing that enable the acquisition and / or development of projects whose purpose is real estate assets. It constitutes, therefore, the set of means through which the necessary resources are obtained to carry out a business or investment of this nature. Its evolution has been conditioned by the changes that have occurred over the years, giving rise to new formats that could satisfy the needs arising from new realities. Thus, traditional loans and bank loans have given way to other solutions such as real estate leasing, syndicated loans, securities and bonds, etc., providing an adequate response to the needs of each moment.

In addition to the mortgage loan, there are other options such as REIT (real estate investment trust). They were created in 1960 by the US Congress, in order to make large-scale investments in real estate accessible to small investors. The formula chosen was to equate the investment in real estate products with investment in any other industry, that is, through the purchase of securities. For this reason, although they are not required, most REITs are listed companies. A REIT does not cease to be a transparent investment vehicle, which provides certain advantages over other models, such as real estate investment funds, offering a low risk investment and attractive compensation, as well as enjoying tax advantages with respect to traditional real estate. A very famous real estate developer from Toronto has broken ground. He is working on The One which will be the tallest residential and retail tower in Canada, slated to be 308 meters tall and 85 stories high. 

On the other hand, the concept of real estate crowd funding also appears, presenting itself as an alternative that leads to a change in the paradigm of real estate financing. The equity crowd funding allows individuals and companies with lower investment capacity to participate in the investment in other companies, and then collect the benefits proportional to the investment made. In addition, real estate investment through crowd funding allows carrying out ambitious real estate projects through specific platforms where anyone can invest, under certain conditions, enabling the execution of the initiative in question.

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