Real Estate vs Real Property: What’s the Difference?

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Understanding the distinction between real estate and real property is crucial for landlords navigating property ownership. While these terms are often used interchangeably, they actually refer to different aspects of property ownership.

In this article, we'll delve into the nuances between real estate and real property, shedding light on their differences and implications for landlords.

Describing Real Estate

Real estate encompasses various types of properties, each serving different purposes. Residential properties, such as houses and apartment buildings, provide homes for individuals and families. Commercial properties, including office buildings, retail spaces, and industrial facilities, cater to businesses and enterprises.

Additionally, there are specialized properties like agricultural land and vacant lots awaiting development. In essence, real estate refers to the physical land and structures built upon it.

Some real estate categories include:

  • Residential Properties: These include houses, apartments, condominiums, and townhouses, serving as living spaces for individuals and families.
  • Commercial Properties: This category encompasses office buildings, retail stores, shopping malls, warehouses, and industrial facilities, catering to businesses and commercial activities.
  • Specialized Properties: These properties have unique characteristics and purposes. Examples include agricultural land used for farming or ranching activities, as well as vacant lots earmarked for future development projects.
  • Mixed-Use Properties: These properties integrate multiple types of land use into one development, like buildings that feature both residential and commercial units or those with retail spaces on the ground floor and residential units above.
  • Vacation and Second Homes: These properties are purchased primarily for recreational purposes or as secondary residences, offering owners a getaway from their primary dwellings.
  • Industrial Properties: Industrial real estate includes manufacturing facilities, warehouses, distribution centers, and research and development (R&D) facilities, supporting various industrial operations and logistics.
  • Hospitality Properties: This category encompasses hotels, motels, resorts, and other lodging establishments, providing temporary accommodation and services to travelers and tourists.
  • Healthcare Properties: Healthcare real estate includes hospitals, medical offices, clinics, assisted living facilities, and nursing homes, catering to the healthcare needs of communities.
  • Educational Properties: Educational real estate comprises schools, colleges, universities, and other educational institutions, providing spaces for learning and research activities.
  • Government Properties: These properties are owned and operated by government entities at various levels (local, state, federal), including government offices, courthouses, police stations, and public infrastructure.

A city street.

Methods of Real Estate Investment

Now that we've explored the various types of real estate, let's look into the methods of real estate investment.

  • Real Estate Investment Trusts (REITs): REITs offer investors the opportunity to own shares in companies that own and operate income-generating properties. By investing in REITs, landlords can gain exposure to diverse real estate portfolios without directly owning or managing properties themselves.
  • Crowdfunding for Real Estate: Real estate crowdfunding platforms enable investors to contribute funds towards specific real estate projects. Through online platforms, landlords can participate in investments with relatively low capital requirements, diversifying their portfolios across various properties and locations.
  • Real Estate Syndicates: Real estate syndicates involve pooling funds from multiple investors to collectively purchase or develop properties. This collaborative approach allows investors to access larger and potentially more lucrative real estate opportunities while sharing the associated risks and rewards.

Describing Real Property

Real property encompasses not only the physical land and structures but also the legal rights and interests associated with ownership. These rights include the right to possess, use, enjoy, and dispose of the property as the owner sees fit. In essence, real property represents the bundle of legal rights that come with property ownership.

Important Contrasts Between Real Estate and Real Property

The main differences between real estate and real property lie in their definitions and extents.

A row of suburban houses

Tangible vs. All-Encompassing

Real estate is tangible—you can perceive and feel it. Conversely, real property encompasses intangible rights and interests associated with land, extending beyond the tangible aspects of real estate ownership.

For instance, if you buy a piece of land, the real estate consists of the physical land itself. However, real property also includes rights such as the ability to exclude others from the land, the right to develop it according to zoning laws, and the right to transfer ownership to another party.

Physical vs. All-Encompassing

Real estate pertains solely to the physical structures and land enhancements, whereas real property comprises the land and all its attachments.

For example, when you purchase a house, the real estate includes the house itself, the land it sits on, and any improvements like landscaping or fencing. However, real property also includes less tangible things like rights to use pathways on the land, rights to minerals underground, and rights to the airspace above the land.

Rights of Property Ownership: Real property rights include the right to exclusive possession, use, and control of the property. Landlords hold legal title to their properties, granting them authority over decisions regarding leasing, improvements, and sales.

A judge’s gavel.

Key property ownership rights include:

  • The right to exclusive possession, meaning the owner has sole control over who can enter and use the property.
  • The right to use the property as the owner sees fit, within the confines of applicable laws and regulations.
  • The right to transfer or sell the property, allowing the owner to convey ownership to another party through sale, gift, or inheritance.
  • The right to exclude others from the property, enabling the owner to restrict access to certain individuals or activities.
  • The right to profit from the property, including the ability to earn rental income or capitalize on appreciation in property value.

Regulatory Considerations

Landlords must adhere to various laws and regulations governing property ownership and management. These may include zoning ordinances, building codes, landlord-tenant laws, and environmental regulations, among others.

Inheritance and Property Ownership

Real property ownership extends beyond the lifetime of the owner, with provisions for inheritance and succession. Landlords can designate heirs and beneficiaries to inherit their properties upon their passing, ensuring continuity of ownership and management.

Bottom Line

In summary, while real estate refers to physical properties and structures, real property encompasses the legal rights and interests associated with ownership. For landlords, understanding these distinctions is essential for effective property management and investment decision-making.

At McKenna & Vane Property Management, we recognize the importance of navigating the complexities of real estate and real property. Our team of experts provides comprehensive property management services tailored to landlords' needs, offering assistance with leasing, maintenance, tenant relations, and compliance with regulatory requirements. Whether you're a seasoned investor or new to the landlord scene, McKenna & Vane is here to support you every step of the way.