What is “Real Estate”?
Most people “Know” what Real Estate is. Don’t you?
It is your home (probably) and the vacant lot next door.
It is the shopping center on the corner of the two main roads near your home. And the gas station, too.
And, of course, that ugly apartment house just down the street.
Everybody “knows” what Real Estate is.
It is the LAND and the bundle of rights attached to the land and whatever is built thereon.
Are the trees growing on the land Real Estate? What about the water flowing from a spring (or well) on the property?
And the minerals (and oil/gas) under the land?
What about a farm? What is a farm, by the way? Is it the land or the business upon that land. Are the animals Real Estate? What about the lettuce growing there? What if the farmer doesn’t own the land, but only leases it?
Leasehold interests, mortgages, easements, equipment firmly attached to the ground (unless, of course, it is “business” equipment) are all forms of Real Estate.
A lease to prospect for gas or oil is Real Estate (and in most states is regulated by the Department of Real Estate). But what about an interest in an LLC that holds the lease?
Sometimes, what constitutes Real Estate can be murky.
But does it matter?
If you want to invest in Real Estate, you know it is more than just houses.
The farm is Real Estate even if the farmer leases the land because leasehold interests are Real Estate. An interest in Real Estate could be an investment in the land, or an investment in the business of the farm, or the “farm” structures on the land, or an interest in the trees or crops growing on the land, but not severed from the land. It’s getting murky again.
If all you are going to do is buy a house, you can probably handle it yourself. But if you want to slip into the murky water of options, notes (or other derivatives of mortgages), farms, custom grazing contracts (are they leases?), a coffee plantation on leased land in a foreign country, or a time-share in a condo hotel, or any one of the myriad other Real Estate investments, you might want professional assistance. Hire an expert.
Maybe you just want to rent out your vacation home on AirBnB. Can you do that? Will it screw up your taxes? Maybe. It depends. Murky.
Should you have more protection on these investments? What if someone gets a judgment against you because your minor child had an automobile accident that was his/her fault. Now what? Will an LLC protect you? Maybe.
We all die someday. Not soon, but some day. Who will “get” your Real Estate holdings. Is an LLC enough protection from probate? What about a Family Trust?
Have you heard about a Family Office?
Real Estate can be VERY MURKY.
Hire an expert.