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If you’ve ever considered investing in real estate, you’ve probably heard the term “real property.” Real property is land, plus anything growing on it, attached to it, or built on it. However, it doesn’t include personal property, such as furniture, that can easily be removed from the land.
The terms “real property” and “real estate” are often used interchangeably, but they have slightly different meanings. Real estate is land plus any man-made attachments, like buildings, sewers, and roads, as well as naturally occurring objects, like lakes, trees, and mineral deposits. (Man-made objects are known as improvements; vacant land is considered unimproved land.)
Real property consists of the real estate plus the rights attached to that property. Real property is an important concept to real estate investors because it’s what gives you the right to own, use, lease, and sell the property in the manner that you choose.
Property generally falls into one of two categories -- real property or personal property. Real property is anything that’s permanently attached to land; personal property is not. Examples of personal property include furniture, cars, jewelry, and clothing.
Real property is usually taxed by local governments, like cities, counties, and school districts.
Real property ownership generally includes the following bundle of rights:
Suppose you buy a home in a community that’s governed by an HOA. You’ve purchased real property. The house, garage, and driveway on your parcel are all considered real property. But the furniture, electronics, clothing, and books inside your home are personal property, along with the vehicle you park in the garage.
Because you’ve purchased real property, you have the right to possession. But with that right, you’re required to pay your mortgage and maintain insurance on the property. Otherwise, your lender can foreclose. Your local government can also place a lien on your property if you don’t pay your property taxes; so can your HOA if you don’t pay your fees.
Though you have the right to control of your property, your HOA tells you that you can’t rent out your home for less than 30 days or have a pet that weighs more than 30 pounds. But as long as you follow local and HOA rules, you’re allowed the right of enjoyment, which allows you to more or less live on the property as you please. The right of exclusion allows you to remove any unwanted visitors from the property. Finally, when you decide you want to move somewhere else, the right of disposition gives you the right to sell your real property, although you have to pay off the mortgage using the money you earned from the sale.
