Introduction to Real Estate Business
Real estate means that the investment of capital and resources to improve the land, buildings, roads, utility system, fixtures, and structures. Some of the main 4 types of real estate are land, commercial, industrial, and residential.
When we say the real estate business, then it has to perform various functions like; brokerage, management, marketing, development, sales, professional services, and lending. It provides many career and job opportunities in the following categories; sale agent, real estate attorney, analyst, appraiser, home and building inspector, commercial broker, loan underwriter, and mortgage specialist.
The SWOT analysis of the real estate business would help us to see things from different angles like strengths, weaknesses, opportunities, and threats that this industry has to face.
Here it follows;
Strengths of Real Estate Business
Some of the core strengths of real estate business are as follows;
Value Multiplies Overtime
The investment in the real estate property is one such asset, where the value of your investment increases with time. If a new housing society, main road, or a railway line is connected with your property, then its value multiplies much time more.
Less Risky Investment
Unlike investment in the bonds and shares; where you lose almost all of your money if the stock doesn’t go up in the market. On the other hand, investment in real estate property is one of the safest investments. Its value doesn’t fall from the sky and you would lose everything.
Even its value does fall, and then you can use your property for other purposes like rents, crops, buildings, etc. In that case, you won’t go bankrupt just like it happens with the investment of bonds and shares.
Authority over the Use of Land
Once you have ownership of your property, then you can do whatever you want to do with your land. Whether you want to cultivate some crops or fields, drill down the land for the oil and gas, or establish some building for the rent or other purposes. You would have complete authority over the use of the land. No other asset would provide you such autonomy over its use.
An inflation hedge is an economic term and it means when the currency of a country starts getting devaluing either because of the macro-economic factors or inflation. Then you invest your capital to protect inflation and investors’ interests. Assets like real estate property, gold, or silver fall in the category of good inflation hedge that would not only save the country from inflation but also the investor as well.
Used as Collateral
When you apply for a loan from the financial institution, then the bank would require real estate property to issue you the loan. Even the land isn’t providing much value in the open market, but you can still use it as a security to buy a loan from the bank or any other private business owner.
Traded in the Open Market
Just like a stock market for bonds and shares, banking industry, or the livestock market for the animals. But you won’t see a specific market for the real estate business. Some brokers and agents work in this industry, and their target market is almost everyone.
It doesn’t matter whatever your background or field is, you could invest or buy the real estate property. As long as you have enough capital and something valuable to trade with, then you are the target market.
Weaknesses of Real Estate Business
Some of the internal weaknesses of real estate business are as follows;
Difficult to Transfer Ownership
When it comes to transferring the ownership of a real estate property, then it involves so many people and other institutions. Sometimes it takes years to transfer the ownership from one generation to next. The more family members and relatives are involved, the longer it would take because you would have to bring everyone on the same page.
Not Liquid Asset
The cash is a liquid asset that you can buy anything from anyone anywhere. The real estate property isn’t a liquid asset; it means that you have to sell it to make it liquid in order to make purchases that you like.
Sometimes, when it comes to liquefying your real estate asset, the market doesn’t provide you the rate that you want. You have to sell your asset at a lower rate in case of an emergency.
Huge Capital Required
When it comes to owning a real estate property, then it is not easy. It requires huge capital and something very valuable to buy the land. Sometimes people work their entire lives and they can’t build one house of their dreams.
The supply of land in a country or a region is limited; you can’t stretch it out for more people. If the land becomes less for you in a country, then you can move out to other countries. The laws and regulations of other countries don’t allow you to own a property easily. You have overcome many hurdles to own land if you’re an ordinary person.
Opportunities for Real Estate Business
Some of the external opportunities that the real estate business could use to its advantage are as follows;
If it wasn’t for the land, then no country in the world would have invaded other countries. The fertile beautiful landscape is in great demand across the world because you can use it for production and tourism as well.
The way technology and the mechanical industry is inventing new tools and machinery, the growth and productivity of the fertile land are increasing rapidly. People didn’t much care for the land in the past, but now it means profit. Therefore, everyone is in the race of getting a piece of it.
New Areas have Great Potential
The construction machinery and material have made all kinds of architects and real estate designs possible. However, modern buildings have a great scope of attracting new investors and businesses into your country.
Threats to Real Estate Business
Some of the external threats that are out of the control of real estate business are as follows;
When the economy of the country is in recession, then people start spending less. When people spend less, then it affects badly the overall sale of businesses. As a result, no one would be willing to spend in the real estate property because of the uncertain environments. Economic recession is out of the control of anyone, it takes a lot of time for a country to get out of it.
Competition with other Assets
Real estate is not only a solid asset in the market. There are other assets as well that are even more valuable than real estate. Like gold, silver, oil and gas, wheat, and etc. The most important advantage of such assets is that they are moveable, and you can liquefy it in a market where they’re in great demand. Growth in the other asset means that people won’t take real estate assets seriously.
Price Falls due to Less Demand
The market of the real estate business is very uncertain. When more people are interested in the property, then its value increases. When people stop showing interest, then its value falls from the sky. For instance, if you need cash instantly and the real estate market is down, therefore, you have to sell it at a very price in such circumstances.
Conclusion: SWOT Analysis of Real Estate Business
After studying the swot analysis, we have concluded that the real estate business is a great profitable industry. But it depends on many other external factors. Therefore, it is very important to be familiar with all other variable factors before making any purchase decision.