Real estate is land plus any buildings and resources on that land. Real estate can be used for commercial purposes, such as operating a store or office, or for industrial purposes, such as operating a mine or factory.

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However, the most common type of real estate is residential real estate, which is used for housing.

Residential areas encompass a wide variety of potential residences, from houses to houseboats, and from neighborhood types ranging from the poorest slums to the wealthiest suburban subdivisions. Many of these are not specifically real estate, which is a legal definition describing the state of ownership: residential real estate arises when land approved for residential use is purchased by someone, becoming real property.

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Residential real estate is often a person's most important financial investment, and the value of real property in the estate can fluctuate in the real estate market. Some people buy real estate with the hope of making money, either by selling it for a profit or renting it to others and charging them rent. But most people simply live in their property.

 

First-time residential real estate buyers often finance their purchase with a mortgage, a loan issued by a bank for the purpose of purchasing a home. The more a home is paid off, the more equity it gains.

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In some areas, real estate can be used commercially, especially if the business operates on an appointment-only basis, has very few employees, and generates little or no traffic.

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Do you own residential real estate? See how long it will take you to pay off your mortgage with Bankrate's mortgage calculator.

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Example of residential real estate

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Mr. Ferdy runs a small dental practice in an apartment building in Pantai Indah Kapuk, Jakarta. He has a direct office and is permitted to operate in a residential area due to the relatively small size of his dental practice. This differs from his residence, which is in another building across town that he rents from a landlord who owns the building. The landlord earns his income from the residential real estate he rents out.