Real Estate vs.
Real Property: What's the
Difference?
By
TROY SEGAL
Full Bio
Troy Segal is an editor and writer. She has 20+ years of experience covering
personal finance, wealth management, and business news.
Learn about our editorial policies
Updated July 18, 2023
Reviewed by ANDY SMITH
Real Estate vs. Real Property: An Overview
Real estate and real property certainly sound very similar, and the two
concepts have a lot to do with each other, but there are subtle differences
between them. Understanding those differences can help you understand the
nuances of the land you own and how you own it. While real estate often
refers to land, the term real property takes things a little further and examines
the rights related to that land.
KEY TAKEAWAYS
Real estate is a term that refers to the physical land, structures, and
resources attached to it.
Real property includes the physical property of the real estate, but it
expands its definition to include a bundle of ownership and usage
rights.
The distinction is most useful in the real estate world, where different
ideas might apply to owners versus renters or leasers.
To most of the general public, the idea of real estate encompasses real
property, but from a legal perspective, the distinction is important.
The real property consists of both physical objects and common law
rights; real estate only consists of physical objects.
Real Estate
Real estate is simply a piece of land plus any natural or artificial—man-made
—improvements that are attached or have been added. Natural attachments
are part of the land and include trees, water, valuable mineral deposits, and
oil. Artificial improvements include buildings, sidewalks, and fences. Real
estate can be split into two broad categories—residential and commercial.
Residential real estate is property intended for human habitation by a single-
family or multiple families. Real estate may be leased or owner-occupied, but
the term residential real estate most often refers to property that is leased.
Commercial real estate has a business use and focus. This property type
includes office buildings, malls, restaurants, and other such activities.
Commercial real estate may be owner-occupied or leased.
Industrial real estate is a subdivision of commercial real estate and includes
property where manufacturing, warehousing, production, and assembly take
place.
Real Property
Real property is a less commonly used term and as such, is a less commonly
understood concept. Real property is a broader term and includes the land
itself and any buildings and other improvements attached to the land. It also
encompasses the rights of use and enjoyment of certain land, as well as any
of its improvements.
Renters and leaseholders may have the right to inhabit land or buildings—a
real property consideration—but those things are not considered real estate.
Real property includes real estate, and it adds a bundle of rights. This bundle
of rights is a broad term used to organize property rights—as they relate to
real estate. In a nutshell, it grants property owners the ability to use their
property as they see fit.1
A bundle of rights encompasses five different rights of the property owner:
1. The right to possess is the right to occupy the property.
2. The right to control is the right to determine interests and uses for
others.
3. The right to enjoy is the right to use the property without outside
interference.
4. The right to exclude is the right to refuse others' interests or uses for
the property.
5. The right to dispose of is the right to determine how and if the property
is sold or given to another party.1
There are some other complex exceptions and restrictions to these rights and
legal treatments.
Key Differences
In general, the difference between real estate and real property boils down to
the inclusion of the bundle of rights. The real property consists of both
physical objects and common law rights whereas real estate consists only of
physical objects.
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