real estate

The Distinction Between Real Estate and Real Property

For most people, the terms “Real Estate” and “Real Property” might seem to be synonymous with one another as they are often used to imply the same thing. However, to someone who has a career in professional property management, or someone looking to invest, it is perhaps a good idea to know the difference between real estate vs real property. In addition to this, types of real estate, types of property, and types of commercial properties are also three different subjects that need to be understood independently of each other.

So, what is the difference between them all? What types of real estate exist, and what types of property exist? And, why are all these different terms and divisions necessary for successful real estate and property management? In this article, we will explain the distinctions between each of them. Let’s get into it.

Real Estate vs Real Property

What does the term “Real Estate” envelop?

Real estate, as many people correctly assume, is any physical property or land which includes buildings, but also the area that lies beneath the land and the air above it. The word “real” in the term literally refers to the fact that an asset is, in fact, tangible i.e., physical.

There are four types of real estate, mostly divided according to the types of usage of that real property.

Types of Real Estate:

  • Residential
  • Commercial
  • Industrial
  • Land

Residential real estate refers mostly to homes, as the name implies, both new and resold. They have several sub-categories, of which the most common is a single-family house/home. Others include townhouses, condominiums, duplexes, co-ops, triple-deckers, quadplexes, vacation homes, high-value, and so on.

Commercial real estate refers to shopping centers, malls, educational and medical buildings, offices and hotels, etc. Even though all types of real estate can be used to generate some income, only these are included in the commercial category, with some exceptions. Types of commercial properties also include apartment buildings even though they are residences because they are used to produce income.

Industrial real estate refers to property or buildings used for manufacturing, like factories, but also warehouses. This includes buildings used for production, storage, goods distribution, and research.

Goods distribution buildings can also fall into the commercial category, but that depends on the way the distribution is handled, as well as location and other aspects.

Land real estate simply means what the name implies – land. Vacant lots, farms, ranches, and all other types of land are included. This means reused, underdeveloped, site assembly, and subdivision land.

What is Real Property?

While real property is used less and a usually misunderstood concept, it actually envelops a broader spectrum than the term real estate or any of the types of real estate. This is because it still does include the “real” part, all the land and buildings, and all of the things mentioned before, but it also includes intangible things, such as rights.

This is the main distinction in the “real estate vs real property” dilemma, that bundle of rights. So, in addition to the land and the buildings we talked about in different types of real estate, real property can include things like rights of enjoyment and usage of that land, like improvements, occupation, control, and more.

No matter what types of property we’re talking about, the bundle of rights includes the following:

  1. The right of possession, which means the right of occupation of the property
  2. The right of control, which includes the right of determining its interests and uses
  3. The right of enjoyment, which is the right of using it without any interference by a third party
  4. The right of exclusion, which is the right to deny use and interest of that property to others
  5. The right for disposing of the property, which means the right to decide if and how it will be sold or given away

Example of Real Property

As it turns out, you can be an owner of different types of real estate while having different real property rights. For instance, a home can have multiple people with the right of possession and enjoyment, but not all can have the right of controlling it or disposing of it.

A good example of real property is when kids inherit the real estate from a parent who is not yet deceased but has given them the right of possession, enjoyment, or control, or all of the above. Let’s say it is a family business for example. The children can use it to make a profit, control many of its aspects (improvements, etc.), but the parents still retain the right to dispose of it and maintain ultimate control.

Real Estate Agents

People who work in the real estate industry are accustomed to the nuances between real estate and real property due to the different branches and aspects of their work. If a person outside of this profession is looking to trade in different types of property, it is recommended they engage a realtor before deciding on the types of real estate investment or trade they will go for.

The type of real estate investment also determines the type of agents you should employ. These include:

  • Real estate agents, who arrange real estate transactions
  • Sellers’ agents, which assist sellers in finding buyers, determine the price, and other aspects of the sale
  • Buyers agents, which help the buyer with the similar, only with the goal of purchasing

Realtors are real estate agents that are members of the National Association of Realtors, which serves the purpose of information exchange about the real estate investment types, sales, purchases, and all other aspects of the industry.