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A Real Estate Investor's Guide To Basic Real Estate
Principles
It is important for Real Estate Investors to have an understanding of some of
the basics of real estate so you can be a more-informed investor.
In real estate, there are two categories of property, real and personal. Real
property is defined as the land and whatever is attached to it, known as
improvements. Personal property is everything that is not attached to land or
buildings. This is often known as chattel.
A fixture is an item of personal property that has been converted to real
property by permanently attaching it. Two examples include chandeliers and
cabinets. When they were at the store, they were personal property. Once they
are attached to the property, they become real property.
A listing agreement and an agreement of sale specify what is considered as a
fixture. If you are purchasing a property, you should carefully inspect this
clause to see what you are getting and what you are not getting.
When you purchase real property, you get what are known as a "bundle of rights".
These are the rights of ownership. They include the right to occupy, to use, to
allow others to use, to rent, to restrict, to construct buildings, to keep
others off, to leave and abandon, to convey ownership and to encumber.
A freehold estate refers to an ownership interest in property for an
undetermined period of time. It is a form of ownership that you get when you
purchase a property. There are various types of freehold estates, with the most
preferred type being called fee simple. It is the highest and most complete form
of ownership possible. It gives you the full bundle of rights, including the
right to pass your ownership interest on to your heirs when you die.
There are different forms of taking ownership to a property, and it is a good
idea to understand each one and what it means. They are severalty, tenancy by
the entirety, joint tenancy and tenancy in common.
Ownership of real property can also be held in a trust. A trust is a legal
instrument that is used to protect family ownership interests. A trust has three
parties, a trustor, a trustee and a beneficiary. The trustor conveys ownership
of the property into the trust, which is then held by the trustee. Based on some
event according to the terms of the trust the property is eventually conveyed to
the beneficiary.
Title is the right of ownership of property. There are five basic kinds of title
- naked possession, color of title, right of possession, good title and complete
good title. The purchase of title insurance will insure a "good" title. A title
company, or abstract company, will do a complete title search to discover if
there are any "clouds on the title".
A deed is a written document that conveys title of real property to an owner.
The person who gives or grants the deed is called the grantor. The person who
receives the deed is the grantee.
There is a difference between title and deed. Title is the right of ownership of
property. A deed is a written document that conveys title to the property. Title
is a right. A deed is a document. The two most basic types of deeds are the
quitclaim deed and the warranty deed.
A general warranty deed provides a guarantee of good title not only by the
seller, but back through the chain of title through all the previous owners of
the property. It provides the strongest title protection to the grantee, or
buyer.
It is important that every Real Estate Owner and Investor understands these
basic principles before purchasing Real Estate.
Chris Parks is a Real Estate Investor who has been involved in Real Estate
in one capacity or another since the mid 1980s. As a member of a small group of
Real Estate Investors & Entrepreneurs, and always having the knack for
explaining Real Estate Basics in an easy to understand manner, Chris created REI
for Newbies in order to teach & assist new Real Estate Investors in a
step-by-step, easy-to-understand manner.
http://www.REIforNewbies.com
