What is 'Real Property'
Real property, also referred to as real estate, realty or immovable property, is any property attached directly to land as well as the land itself. It is any subset of land that has been improved through legal human actions. Real properties include buildings, ponds, canals, roads and machinery, among other things.
BREAKING DOWN 'Real Property'
Real property is composed of any designated portion of land and anything permanently placed on or under it. The elements on or under the land include natural resources and/or human-made structures.
Owning real properties involves different types of estates, which define the rights of the owner to use, transfer and/or sell his real properties. These estates are recognized by the law. The kind of estate depends on the terms of the lease, deed, will, land grant and/or bill of sale through which the estate was received.
Fee simple ownership, also called the fee simple absolute, is the most common type of freehold ownership on a real property. This is the highest possible type of ownership interest that can be owned by a real property holder. Those who own properties under this type of ownership have the right to sell the house, leave it to their beneficiaries or make changes, even if they still owe money on their mortgage. These rights are bounded by government powers of compulsory purchase, taxation, escheat and police power.
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Americans have stashed the majority of their investment dollars in the stock market over the years. But there may be a new trend on the horizon. In 2007, nearly two-thirds of Americans were investing in the stock market; last year, just over half did. A new generation of investors may be turning to real estate instead.
RealtyShares recently teamed up with Harris Interactive to put out the Real Estate Investing Report, surveying Americans on their investment preferences. And according to the survey results, 55 percent of millennials are interested in investing in real estate, the highest percentage of all demographics questioned. Research from Fannie Mae supports these findings, reporting that 85 percent of millennials think real estate is a good investment. With such a strong preference for real estate, it is important to understand why millennials are interested and how they may invest in the future.
Why is it important? Well, last year, millennials became the largest generation of Americans. According to a recent Pew report, there are 75.4 million millennials compared with 74.9 million baby boomers. As the largest age group in America, millennials will have the greatest ability to shift the market as their net worth builds, rendering it key to take note of millennials’ views on real estate and investment opportunities overall.
Homeownership among African Americans has declined to levels not seen since before passage of the Fair Housing Act of 1968, a major concern among economists and financial planners. Chief among the long-term concerns is the impact this black homeownership trend will have on the already grim outlook for African Americans and their preparation for retirement.
Black people are moving into homeownership at a much slower rate than anything we have seen in the past,” says Laurie Goodman, co-author of the Urban Institute’s recent report, “Are Gains in Black Home Ownership History?” and co-director of the Urban Institute’s Housing Finance Policy Center.
Black Homeownership Gains Erased
In the three decades after the Fair Housing Act passed, the black homeownership rate in America rose by nearly six percentage points, the Urban Institute report said. But from 2000 to 2015, that gain was more than erased as the black homeownership rate dropped to roughly 41%. By contrast, the homeownership rate among white Americans is about 71%.
“Gains in black homeownership have been hard won, which amplifies our concern that in the last 15 years, black homeownership rates have declined to levels not seen since the 1960s, when private race-based discrimination was legal,” says the report.
The black community got hit harder by the housing crisis than other groups. In general, African Americans bought homes at the peak of the bubble at higher rates that whites and were often offered costly subprime loans, even when they qualified for prime loans with lower interest rates. Also, black families did not benefit as much as white families, overall, from the post 9/11 recovery.
The country’s largest Ivy League endowment wants to sell around $2.5B in real estate assets and private equity investment as it continues to try and redefine itself.
A person familiar with the matter said Harvard Management Co., the unit that manages Harvard University’s $35.7B endowment, hired Cogent Partners to market $1.6B of real estate and nearly $1B of venture capital and private equity investments, Bloomberg reports. The move follows the endowment’s decision earlier this year to transfer its real estate investment team from Harvard Management to an external manager.
Harvard’s endowment has been facing some headwinds as of late, having underperformed its peers last year, reporting a 2% annual investment loss for the fiscal year ending in September. This sale could represent a shift in strategy as Harvard Management’s newest CEO, N.P. Narvekar, tries to turn things around.
Governments own and lease more commercial real estate assets than any other entity around the world. The trouble is no one knows exactly how much. Two new tech companies are working to make it easier for real estate professionals to discover and work with government assets.
PublicAssets founder and CEO Skip Rudolf said the government commercial real estate market is about 15% of the total industry in the U.S. and is extremely active. San Francisco-based PublicAssets has about 5.5 million records in its database of government assets spanning the federal government, all states and the top 200 cities with a population of more than 50,000.
Sub-federal, or government entities not part of the federal government, own about 6B SF to 7B SF, or about 70% of what the federal government owns. The City of New York owns 450M SF. Among the assets of the Port Authority of New York and New Jersey is the iconic One World Trade Center.
Chicago owns 74M SF, Philadelphia has 35M SF and San Jose owns 125M SF of buildings and land, according to Rudolf. Comparatively, the federal government owns about 270,000 buildings and 2.8B SF. In the U.S., 95,000 governments, special authorities and special districts own more than 3 million buildings and 650 acres of commercial real estate, which includes offices, stadiums, warehouses, hospitals and parking lots.
Mall owners are making the best out of a bad situation. The seismic shift in consumer preferences has rocked the retail industry to its core, resulting in more than 36M SF of department store space that will be vacated this year. But department stores’ loss is mall owners’ gain. Landlords are profiting off the closures by bringing in entertainment, fast-fashion, and food and beverage tenants to fill the space — and they are getting quadruple the rental income.
In addition to finding more experiential (and thus more appealing) tenants to take the place of department stores like Sears, Kmart and Macy’s — which will close a collective 300-plus stores by the end of the year — mall owners are charging replacement tenants three to four times the amount of rent they were receiving from department stores, according to a recent JLL report. “The way it works when developers build a center is department store anchors are a must-have,” JLL director of retail research James Cook said, adding that these anchors tend to pay cheaper rents because they are in such short supply. “Rent is low compared to what a new retailer will pay.”
Cashing In Such is the case for Seritage Growth Properties. The REIT, which owns 266 properties formerly held by Sears Holdings, is monetizing vacant boxes by redeveloping and re-leasing the spaces to new tenants. On average the REIT is receiving 4.4 times the previous rental rate from these new occupiers. Where Sears Holdings was paying $4.40/SF, in-place third-party tenants are paying $12.74/SF and soon-to-occupy tenants will be paying an average of $18.55/SF, JLL reports. As of March, 57% of Seritage’s portfolio was leased by apparel, restaurant and entertainment tenants.
. multifamily rents increased slightly in April, though the pace of rent growth continued to decelerate in response to new supply. Apartment rents averaged a $3 gain up to $1,314 month-to-month across the country, according to Yardi Matrix's monthly survey of 121 markets. On a year-to-year basis, rents rose 2% nationwide, reflecting a 5.5% drop in the average growth rate as rents return to their normal growth levels.
"As we have said for months, the deceleration is expected, given the rapid increase in supply and the inevitable return to growth that is more in line with income gains," Yardi reports. The rent-to-income imbalance has been a big problem in recent years, with most Americans allocating more than 30% of their income to pay for housing.
Landlords in key markets are being forced to lower rents and offer concessions to remain competitive and attract residents. That is not to say the demand has softened.
The Redfin Housing Demand Index decreased 13.9 percent from February, to a seasonally adjusted level of 108 in March, according to national realtor Redfin.
While homebuyer demand has cooled from its record high of 132 in January, this was still the strongest March since 2013, when the Demand Index registered just one point higher at 109. The Demand Index is based on thousands of Redfin customers requesting home tours and writing offers. A level of 100 represents the historical average for the three-year period from January 2013 to December 2015.
Compared to February, the seasonally adjusted number of buyers requesting tours was down 5.5 percent in March, and the seasonally adjusted number of buyers writing offers was down 22.8 percent.
The story in March was once again a limited selection of homes for sale, constraining the options for interested buyers. Across the 15 metros covered by Demand Index, there were 12.5 percent fewer homes for sale than the previous March, marking the twenty-second consecutive month of year-over-year inventory declines.
Can two disparate investment markets – one old and one new – get along without driving each other crazy?
That’s the key question for crowdfunding and the real estate market. It’s a question being answered in positive ways in 2014, as the two “odd couples” appear to be pairing up quite nicely and giving investors a new way to leverage profits from the burgeoning U.S. real estate market.
The real estate crowdfunding site iFunding estimates the size of the combined market at $11 trillion.
At the “Innovations in Real Estate: Crowdfund Investing” conference in April 2014 in New York City, Markley Roderick, a lawyer with Flaster/Greenberg PC and the conference moderator, pointed out that new regulations are linked to the Jumpstart Our Business Startups (JOBS) Act of 2012. The new rules allow mostly affluent investors (with a net worth of $1 million or more) to gain direct access to the real estate market through crowdfunding, or peer-to-peer lending (among other investment markets).
While the U.S. Securities and Exchange Commission explores ways to allow investors of all income levels to access the real estate market online, Roderick says that wealthier investors are already investing on crowdfunding sites like iFunding, Realty Mogul, CrowdStreet and Fundrise.
“If only a small percentage of them invest only a small amount of their assets in real estate, the market will be trillions of dollars,” explains Roderick.
U.S. homebuilding fell in March as the construction of single-family homes in the Midwest recorded its biggest decline in three years, likely reflecting bad weather.
Housing starts declined 6.8 percent to a seasonally adjusted annual rate of 1.22 million units, the Commerce Department said on Tuesday. February's starts were revised up to a 1.30 million-unit pace from the previously reported 1.29 million-rate.
Economists polled by Reuters had forecast groundbreaking activity falling to a 1.25 million-unit pace last month. Homebuilding was up 9.2 percent compared to March 2016.
Construction in February was boosted by unseasonably warm temperatures. But temperatures dropped in March and a storm lashed the Northeast and Midwest regions, which could have accounted for the drop last month in homebuilding.
Single-family homebuilding, which accounts for the largest share of the residential housing market, fell 6.2 percent to a 821,000 unit-pace last month. Single-family starts in the Midwest declined 35 percent, the largest drop since January 2014, to their lowest level since August 2015.