If you own real-estate or hope to do so someday, then you’ll want to know about personal and real property. I put some time into research to write a comprehensive blog post that answers the nagging question ”What exactly is real and personal property and the differences between them?”
Real property is defined as all assets attached to a piece of land including said land. With the transfer of ownership of said land, the new owner gets to also control the land and all its attached assets.
These assets are often times immovable. Movable assets and even smaller pieces of land can sometimes be attached to a bigger piece of land in a process known as annexation. This creates a fixture. Some examples of such assets include buildings, roads and crops.
Meanwhile, personal property has to do with all assets within the land that can be taken into and out of the land. The minute a property is detached from a piece of land it ceases to be a real property and becomes a personal one. This process is often referred to as severance. Examples of personal property include cars, money, intellectual property, clothes and jewelry.
1. Real property is often referred to as the legal right to control and use of all assets attached to a piece of land.
This includes real-estate which can be owned or land which is leased. Real property includes agricultural produce, water bodies and infrastructure. On the other hand, personal property is regarded as any property apart from land and the resources attached, that can be owned by someone or a corporate entity. Examples are cars, intellectual property and office equipment.
2. Real property tends to be assets that appreciate with time.
This is usually a result of the land on which these resources lie. When it comes to personal property, these possessions tend to depreciation with time. Cars lose value the minute they are driven out the dealership’s lot. Even intellectual property like patents expire at some point if they are not actively renewed.
3. Real property include lands and resources such as minerals, buildings and water bodies.
These are immovable properties as opposed to personal property that can be moved. Jewelry, cars and clothes can and are usually moved after ownership of real-estate has been transferred.
4. Real property is almost always tangible.
You can physically inspect what you get for your money whether it’s a buy or lease. Meanwhile when it comes to personal property it can be tangible or intangible. For example, company cars and some office equipment like furniture can be tangible while software, intellectual property and stocks aren’t.
5. When it comes to owning both types of properties, the risks are quite different.
Natural disasters such as landslides, earthquakes, cyclones, tornadoes and flash floods are some naturally occurring events that threaten the value of real property. While man-made factors like market forces and bad business decisions could lead to software and stock crashes.
6. Speed of transactions can be quite different when you look at real and personal property.
Buying a car can be done in mere hours while it takes weeks and sometimes months to acquire real-estate. Same goes for buying and selling stocks. For real property, you may need to get permits from the government to use the resources below and above the land. Examples of these include irrigation and mining.
Also when it comes to scaling, it is much easier to diversify stocks than to diversify real-estate. You can buy and sell faster for less capital with the former while transaction is slower and generally requires more capital for the latter.
7. When there is a transfer of ownership of land, real property is also transferred while personal property isn’t.
This is evident when one sells his/her home and then takes the furniture, clothes, jewelry and cars when they leave. The land, home, garden and the shed stay behind as those would be part of the new owners possession.
For aspiring and current property owners, knowing the category your possessions fall into will help you make better decisions when you are faced with the challenge of buying or selling property.