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Real Estate You Need to Know: Bundle of Rights
from: Thomas Kinsey Schneider, Ph.D.Big Yawn
When you first read basic material about real estate, you might
ask yourself, "great, but how is all this going to help make me
rich?" The answer is: if you want to get rich in real estate,
you have to understand what you are buying; if you know more
than the other guy, you can find properties that he can not, and
you can take command at the negotiating table. This is not a
bunch of academic theory - you need to know this stuff if you
really want to become a successful real estate investor.
I do not intend to give away my secrets in free tutorials. What
I hope to accomplish here is to prove to you that there is a
whole world of information that you need to learn to be
successful, and that I can teach you in a way that makes sense
and that is easy to understand. If these tutorials are
successful, you will buy my book; and then I will reveal my
methods to you. Shameless advertising? Probably, but this is one
way that I can cut through the gaggle of real estate books that
promise much but deliver little. I hope in the end you will
agree that I promise much and deliver more.
Owning Real Estate
An odd fact about real estate is that the most fundamental
aspect of owning land and property is grossly misunderstood by
the general public. Sadly, even many real estate professionals
do not fully understand the concept of property ownership.
You are about to embark on a career of buying and selling real
estate. That is your new path to great wealth. You might want to
know what the idea of owning real estate actually means!
Ownership is nothing more than society granting to you the right
to use land to the exclusion of others. Through the rule of law,
society identifies what aspects of ownership are to be defended
and enforced. Property rights are a consequence of community,
because a person stranded on a previously uninhabited island
clearly has no need to worry about property rights. But as soon
as a second shipwreck survivor washes up on shore, the two must
start to divide the resources, hopefully in an equitable way. As
the island becomes more and more crowded (ships can not seem to
avoid that reef offshore!), the definition of rights becomes
ever more critical to avoiding conflict. By defining these
rights clearly, the growing island society avoids wasting
resources fighting over rights, and instead can use those human
resources for more productive pursuits and economic gain.
Individuals and Communities
Over time, conventions and laws have evolved in modern societies
to balance the needs of an individual against those of the
larger community. This means that the rights of ownership come
with some constraints so that the actions of individuals on
their own land do not adversely impact society at large. The
rights associated with ownership are therefore not unfettered,
but are tempered by the desire to balance competing needs. You
may want to put a grocery store on your property, but are
prohibited from doing so because the land is zoned by society
for residential use only. "It is my land and I can do what I
want with it" is true, but only to the extent that your desired
actions are sanctioned by law.
When you buy real estate, what you are really purchasing are the
rights to possess and control use of the land, rather than the
land itself. At first this seems like a subtle point, and that I
am splitting hairs. But this point is critical to understanding
real estate. When you buy a car with cash, you own that car
absolutely. You own the car itself, not just rights to use and
possess the car. Buying the car is no different than going out
and buying a T-shirt, except one takes less money than the
other. Hopefully it is the T-shirt that costs less. But buying
land or real estate is different. You can not grab your acre,
put it in your pocket and take it to another state. Land is
permanent and immobile, and owning something that is forever and
can not be moved is just different than owning something that
you can take with you or throw away. The laws recognize this
difference. That is why you do not own land like you do a car or
your clothes. With land, you own rights. From a practical point
of view, you are able to almost do all the things you are used
to with ownership. But not everything. Nobody will ever tell you
what to do with your T-shirt (except maybe your spouse begging
you to wash it). Society has no interest in your shirt. But land
is different. The country itself is defined by land. Society has
a long-term interest in what you do with your land, and what
will happen to the land when you are gone.
Bundle of Rights
Since land ownership is in reality defined as a set of rights,
the fundamental basis of ownership can only be understood by
examining those rights. The classic analogy used in real estate
to describe the rights of ownership is a handful of sticks,
where each stick represents a right or stream of benefits. As
more are added, the bundle gets larger. But while commonly used,
and found in virtually every book about real estate ever
written, I find that the analogy is really not terribly helpful,
nor particularly imaginative. The more important point is to
discover what is included, typically, among the rights of
ownership in modern societies.
These rights, summarized below, are explained in detail in my
book.
* Right of Possession * Right of Exclusion * Right to Transfer
Rights * Mineral and Subsurface Rights * Water Rights
Before buying any property, before making any real estate
investment, before embarking on your new career as a real estate
mogul, you should fully understand all of these rights of
ownership. I walk you through each of these in detail in my
book, Beyond No Money Down.
Big Advantage
With a full and deep understanding of what owning real estate
really means, you have an advantage over others when looking for
property and negotiating a price. You know exactly what you are
getting, and therefore, are in a superior position to know what
price the property in question is really worth. These concepts
are not just some airy academic theory, but truly important to
your career in real estate investing. At the same time, they are
easy to understand when clearly explained. Understanding the
fundamentals is essential to learning the nuances of real estate
that will help make you rich. Understand these, and you can rule
the roost in any real estate transaction. Knowledge is power,
and I give you that knowledge in my book in an easy-to-read and
easy-to-understand format.
If you want to learn more about Beyond No Money Down, go to:
www.realpropertymillionaire.com
About the author:
Dr. Schneider is a recognized expert in building personal
wealth, with his best selling books "Beyond No Money Down" and
"Trading Futures: Only One Way to Win". Practicing what he
preaches, he now lives in a beautiful waterfront home in central
Texas, owns and operates his own jet, and travels the world
first class giving lectures across the country and across the
globe.
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