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The Basics of Real Estate

Real estate has long been a vehicle for the creation of wealth for both individuals and businesses. For example, when an individual pays down a mortgage, he receives a return on his investment through mortgage reduction. This investment eventually leads to full ownership of an asset and an overall increased net worth. In addition, some businesses also create wealth through the development of real estate for sale or lease to other businesses. In the past, real estate has played a primary role in wealth creation for some of the nation’s wealthiest people. In the 1990s the role of real estate as a driver of wealth diminished in the United States. In 1984, approximately 33 percent of the people on the Forbes 400 list of the nation’s wealthiest people acquired their wealth from the real estate and the oil and gas industry. This number dropped to approximately 20 percent in 1994 and 17 percent in 1997. However, with the bear market early in the 21st century, money is again pouring into real estate. A majority of the list has significant assets in real estate. Real estate still plays a critical “indirect” role by driving the success of several businesses, which directly drives wealth creation in the United States.

However significant these statistics may seem, they belie the fact that the underlying real estate is only valuable if it provides a platform to deliver a product or service in fulfillment of market demand. The value of the services you provide on the real estate validates real estate investment.


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