(2) Development, which has to do with the pur chase of tracts of land, usually in their wild state, sub dividing them, adding necessary street improvements, such as water, gas and sewers, and retailing them in small parcels to investors and builders. This is an important and useful branch of the business and it has resulted in the opening up and settlement of many sections of the country.
That part of real estate operation which concerns itself with building may be divided into three parts : (1) Speculative building, which consists in erecting buildings for the purpose of sale at a profit.
(2) Investment building, which includes the erec tion of buildings for ownership by the builder, either for his own use or to secure a rental income. This form of operation might properly come under the vestment division of the real estate business altho the investor is temporarily conducting a real estate opera tion.
That form of operation which is concerned with making mortgage loans is divided into two parts : (1) Making building or temporary loans.
(2) Making permanent loans.
Building or temporary loans are made for the pur pose of erecting, altering or repairing structures on the land, or to finance the development of new tracts. They are secured by mortgages on the property to be improved, with the agreement that the money shall be advanced as the work progresses. The lender must supervise the work and runs the risk of having to take over uncompleted structures. Consequently a greater rate of interest is charged on such loans than on ordinary mortgages. On the completion of the work it is to the borrower's interest to replace the loan at a lower rate of interest. Many loans of this character are now made in the form of building and permanent mortgages, the agreement being that the mortgage shall run for a definite time thereafter.
Permanent loans are when money is advanced or lent at current interest rates, upon real estate mort gages or mortgages of leaseholds, the property being considered ample security for the loan. These loans are usually made for a definite time at a fixed rate of interest which is payable periodically.
It should be understood that the class of mort gage loans coming under this division are those made to secure mortgages for resale to investors.
6. Real estate is dealing in or with real estate on behalf of others. It is of especial importance in that it engages the attention of the greatest number of persons concerned with the real estate business. It is divided into two parts, broker
age and management.
Brokerage consists of bringing about transactions between principals for a compensation, usually called "commission." The transactions may be sales, leases, exchanges, rentals or loans. Some brokers give their whole time to sales, leases and exchanges, some to renting property, and others, known as loan brokers, specialize in the securing of mortgage loans. These men are specialists in their respective lines. There arc many men who conduct a general real estate brokerage business, however, and engage in every phase of it as opportunity presents.
Management is the division of real estate, agency which concerns itself with the derivation of income from real estate as the agent of the owner. It in cludes the securing of tenants, collection of rents and physical care of the property. The owner is re lieved of all the care of managing the property. The agent receives a compensation for his services, usually a certain percentage of the gross rents collected. His duty is to obtain the highest amount of rent and to keep the expenses down, while at the same time see ing that the property is not allowed to deteriorate.
There are a number of offices which earn a steady and substantial income from the management of real estate. The routine work is carried on by trained em ployes while the head of the office exercises general supervision, and has most of his time free for work on brokerage matters.
7. Property, real property and real estate defined. —Property is the right to possess and use a thing.
Real property is a technical legal term meaning the right to possess and use land for a term measured by a life or lives, or for a longer period. In the eyes of the law, all other property is personal property. The right to possess and use a piece of land for the term of one's natural life is real property, because the lifetime is the measure of the term of ownership. A lease of the same land for ninety-nine years, or even a longer period, is termed leasehold and is personal property. If we bear in mind the definition of the technical legal term "real property" it will be easy to remember that all other property, whether connected with real estate or not, is personal property.