Real Estate Accounting Made Easy, 2nd Edition

1INTRODUCTION TO REAL ESTATE

Real estate is generally defined as land and all things that are permanently attached to it. These attachments include improvements made to add to the value of the land, such as irrigation systems, fence, roads, or buildings. When buyers purchase real estate, in addition to acquiring the physical land and its improvements, they acquire other specific rights related to that real estate. These rights include the right to control, exploit, develop, occupy, improve, pledge, lease, sell, or assign the real estate. These rights apply not only to the physical land and improvements but also to the ownership of all that exists above and below ground. These ownership rights can normally be separately leased or sold to interested parties; thus landowners can separately sell the space above a certain height on a particular piece of land. This space is usually called an air right. However, it is important to note that the use and transfer of air rights can be restricted or regulated by state and local laws.

TYPES OF REAL ESTATE ASSETS

Generally, a piece of land can be improved into different types of real estate assets. These improvements can be classified into seven different types of real estate:

1. Improved non-built land
2. Residential properties
3. Commercial office properties
4. Industrial properties
5. Retail properties
6. Hotels
7. Mixed use properties

Improved Non-built Land

In economics and business, land is described as one of the four factors of production (the ...