There are virtually hundreds of real estate investment terms that can be discussed, and subsequently should be learned by real estate investors.
In this article, however, we’ll explain just six of the terms we consider play a major role with real estate investing but are not often understood by investors.
Our intent is not to present an exhaustive study. But rather to simply acquaint you with a general meaning of the more obscure real estate investment terms. The ones we feel are most worth knowing because they can affect your real estate investment’s profitability and rates of return.
A feasibility study examines the anticipated results from any specific real estate development or proposal. They are usually conducted to show the success potential of a project with the goal to enhance the developer’s chances to obtain financing, but can also be made for presentations before various public forums.
Highest and Best Use
The highest and best use of real estate signifies the best economic use of a property with respect to what is legally and physically possible at any given time. A change in zoning or other regulations may dramatically change the highest and best use. When a real estate investor can find and acquire a rental income property that can easily and economically be converted to the highest and best use, the property value can be increased dramatically.
Land Use Regulation
Land use regulation deals with how the land is used. Because most areas of the country have detailed land use rules that are frequently changed and have the effect of reducing land values, real estate investors would be wise to watch for public notification of these regulatory changes in the newspaper and attend the public forum.
Real estate in an unincorporated area means that it outside legal city boundaries. These areas are governed solely by county government. Though property in the unincorporated area often have greater flexibility of use because county building and zoning rules are often more lax, they may not have all the public services available to other parts of the county.
A variance is an approval granted by the city or county commission to enable a property to be used contrary to one of the building codes or sometimes contrary to a zoning regulation. A variance may be easier to obtain than a complete change of zoning, but each circumstance will vary.
A zoning board is usually compiled of appointed (non-elected) community leaders whose duties are to hear and vote on zoning issues within the community. They can give an investor advance information about the acquisition of a real estate investment property that could go up in value due to a proposed project and offer a good real estate investing opportunity.
So You Know
A more complete glossary of real estate investment terms can be found at real estate glossary of terms.