Real Estate

Real Estate

Real estate is an integral part of finance. Real estate courses are given as part of Bachelor of Commerce and Bachelor of Business Administration for a reason, and it is because real estate is closely related to the field of finance. Finance, in turn, is a field of economics concerned with financing, investing, monitoring and managing resources. For example, corporate finance is division that looks at the management of large sums of money required to keep corporations afloat.

However, when one talk about real estate, one is essentially discussing getting a piece of property, perhaps a house, a condominium or a commercial property. Naturally, real estate does not come cheap and a lot of planning must be involved in purchasing a home, particularly if it is the first and principal residence of a person.

Residential buildings at Humber River, Toronto. Photo: Elena

One of the major steps in becoming a homeowner is obtaining the funds to purchase the property. Interestingly enough, in economic terms, purchasing a house is not considered nor recorded as an expense, but as an investment. Conversely, a car is recorded and considered an expense. One of the reasons to such different treatments of these entities is that a vehicle typically depreciates in value, while real estate tends to appreciate in value over time.

However, many exceptions exist. For example, a house in a deplorable condition is likely to be valued much less than one which was just built. Indeed, new constructions in wealthy and safe neighbourhoods are usually the priciest ones. But regardless of your budget, chances are that you will need a loan. A loan for the purchase of a residential property is called a mortgage. Obtaining loans and mortgages follow the same pattern in that you must demonstrate that you have sufficient income to cover the interest and capital payments. Furthermore, you must be in good standing with credit rating agencies