What is Property?

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Definition:

Property is anything that a person, business, or other entity owns, meaning that they have rights over that property, such as the right to use it or deny its use.

🤔 Understanding Property

Your property is anything that you own, from your computer, your clothing, and the food in your pantry to your home and your car. You have specific rights over your property. For example, homeowners have the right to occupy their home and refuse other entry to other people. Property can be tangible (real estate, autos, equipment) or intangible (stocks that give you an ownership share in a company, intellectual property that has value like patents and creative works.) People, businesses, and other legal entities can all own property. The value of property is used in determining your net worth - the value of your assets minus the value of your liabilities.

Example

If you own your home, the house and land it sits on is your property. The title to your home proves that you legally own it and gives you exclusive rights to the property. You are the only person who can freely use your house and the land it sits on. With some exceptions, such as police officers, if someone else tries to enter your home without your permission, you can kick them out or even have them charged with trespassing.

Takeaway

Property is like not allowing anyone else to listen to your CDs…

If you own a CD, you can physically hold that CD, put it in a CD player, and listen to the music from it. If someone else wants to listen to that CD, they can’t without your permission, because it’s your property. It’s the same with intellectual property. If you own an idea, such as the design for a piece of industrial equipment, other people can’t use that idea to build the equipment unless they have your permission.

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Tell me more…

What is property?

Property is anything that a person, business, or other entity owns and can enforce certain rights over. For example, someone who owns a car can use that car and, with certain exceptions, can prevent anyone else from using it without their permission.

Property can be either physical or intangible. Something like real estate, a car, clothing, food, or a CD is tangible property. You can hold it, move it around, and give it to someone else. Intangible property includes things you can’t hold or touch, like ideas, patents, copyrights, or computer code.

Philosophers often debate the concept of property. Life, liberty, and property are the three natural rights described by the philosopher John Locke. Some philosophies reject the idea that people can own certain things or anything at all - like anarchism, which argues that property is theft because it gives something to one person when it should be reserved for the common good, or communism, which contends the means of production, the property that allows owners to build wealth, should be owned by the state.

What are the different systems of property?

There are three major systems for describing the ownership and use of property: common property, collective property, and private property. In a common property system, resources are available to all, and the government creates a set of rules to govern their use. In a collective property system, society as a whole determines how to use resources through collective decision-making. In a private property system, individuals or groups can control resources; the owner of a property has the right to use it as they wish, subject to certain restrictions, and deny others permission to use it.

Most modern societies use a combination of private and shared property. For example, people can privately own their homes, cars, clothing, furniture, electronics, and so on. However, some public goods are publicly owned and available to all, such as roadways and parks.

The government’s willingness to enforce property laws is what makes property and ownership important concepts. Ownership isn’t the same as simple possession: If you own a car and lend it to someone else, they may possess it, but you remain the owner. In theory, the other person could face legal trouble if they refused to return it. The government could enforce your property rights, and they could face fines and other civil law penalties or even jail time.

What are the types of property?

Both tangible and intangible property that people can own can be further classified as either real property or personal property.

Real Property

Real property is land and any buildings or other improvements made to the land. Rights that you derive from owning the land, such as ownership of metals or oil in the ground, are also considered real property. Real estate is the primary and most familiar type of real property. Real estate includes land and the buildings and improvements placed on that land, such as your house or a garage.

A title proves your ownership over your real estate, giving you rights over the use of that land and the ability to prevent others from using it - other people can’t trespass on your land, for instance. Recording ownership of real estate also lets the government make sure that the correct person is billed for property taxes on the property.

Personal Property

Any type of property that isn’t real property is personal property. That includes tangible property like vehicles (cars, trucks, boats, motorcycles, airplanes), furniture (couch, chairs, tables), and collectibles (trading cards, action figures, old coins). You’re free to use them, move them around, sell them, or do whatever you want with them.

Personal property also includes intangible property, like stocks, bonds, and intellectual property. It also includes cash: Money is a type of intangible property, even if it’s in the form of physical currency.

What is intangible property?

Not all property is a physical object that you can touch. Some types of property are intangible, but they’re important and they have their own rights attached to them.

Stocks

A stock is a share of ownership in a company. Ownership of stocks allows for companies to be owned broadly by investors; selling stock allows companies to raise capital.

Stocks used to have a physical representation in the form of a certificate, but today that is rare. Even though you can no longer hold a share in your hand, ownership of stocks and the enforcement of ownership rights to stocks is essential to keeping the modern economy running.

Bonds

Bonds are essentially IOUs - securities that reflect that the issuer, typically a company or government, has borrowed money from the bond owner and must pay it back. Bonds may have a physical representation, but don’t always.

Intellectual Property

Intellectual property includes things like patents, copyrights, and ideas. You can’t hold an idea in your hand, but ownership of concepts is important because it offers an incentive for people to create and invent new machines, materials, and methods of doing things.

What are the limits on property rights?

Generally, someone who owns a piece of property has the right to use that property as they wish, and can deny others the ability to use that property. But in most modern societies, these rights are not absolute. Governments often place restrictions on the use of property or limit the ability of owners to protect their ownership rights.

Zoning law is one such limitation. Someone who owns a piece of real estate must abide by the local zoning laws. Most local governments won’t let a company open a factory in a residential area, or set up a liquor store across the street from a school.

In addition, even if you can generally prevent people from entering your property without your permission, a police officer with a warrant to search your car or home can do so, even without your consent.

Is property an asset or a liability?

Property is an asset, not a liability. Anything you own that has value, anything you can sell to someone else to raise cash - a home, shares of stock, intellectual property - is an asset.

However, you may have liabilities associated with your property. For example, if you own an investment property, you might have used a mortgage to purchase it and need to make payments on the mortgage. The house you bought is an asset, while the debt financing it is a liability.

In addition, your ownership of a property can make you responsible for bad things that happen related to it. If someone falls and injures themselves on your property, for example, your ownership of the property may make you liable.

How is property used to help determine your net worth?

Property is a key part of calculating net worth, which is the total value of the property you own, minus the total of all of your liabilities and other debts.

For example, if you own a primary residence worth $250,000, $50,000 in stocks, and a car worth $10,000, you have $310,000 in total assets. (Smaller items of personal property generally aren’t included in calculating net worth.) If you used a mortgage to buy your home and still owe $200,000 on it, and you have $1,000 in credit card debt, you must subtract those $201,000 in liabilities from your assets. That means that your net worth is $109,000.

Ready to start investing?
Sign up for Robinhood and get stock on us.Certain limitations apply

New customers need to sign up, get approved, and link their bank account. The cash value of the stock rewards may not be withdrawn for 30 days after the reward is claimed. Stock rewards not claimed within 60 days may expire. See full terms and conditions at rbnhd.co/freestock. Securities trading is offered through Robinhood Financial LLC.

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This information is educational, and is not an offer to sell or a solicitation of an offer to buy any security. This information is not a recommendation to buy, hold, or sell an investment or financial product, or take any action. This information is neither individualized nor a research report, and must not serve as the basis for any investment decision. All investments involve risk, including the possible loss of capital. Past performance does not guarantee future results or returns. Before making decisions with legal, tax, or accounting effects, you should consult appropriate professionals. Information is from sources deemed reliable on the date of publication, but Robinhood does not guarantee its accuracy.

Options trading entails significant risk and is not appropriate for all customers. Customers must read and understand the Characteristics and Risks of Standardized Options before engaging in any options trading strategies. Options transactions are often complex and may involve the potential of losing the entire investment in a relatively short period of time. Certain complex options strategies carry additional risk, including the potential for losses that may exceed the original investment amount.

Commission-free trading of stocks, ETFs and options refers to $0 commissions for Robinhood Financial self-directed individual cash or margin brokerage accounts that trade U.S. listed securities and certain OTC securities electronically. Keep in mind, other fees such as trading (non-commission) fees, Gold subscription fees, wire transfer fees, and paper statement fees may apply to your brokerage account. Check out Robinhood Financial’s Fee Schedule for details.

Brokerage services are offered through Robinhood Financial LLC, (RHF) a registered broker dealer (member SIPC) and clearing services through Robinhood Securities, LLC, (RHS) a registered broker dealer (member SIPC). Cryptocurrency services are offered through Robinhood Crypto, LLC (RHC) (NMLS ID: 1702840). Robinhood Crypto is licensed to engage in virtual currency business activity by the New York State Department of Financial Services. The Robinhood spending account is offered through Robinhood Money, LLC (RHY) (NMLS ID: 1990968), a licensed money transmitter. A list of our licenses has more information. The Robinhood Cash Card is a prepaid card issued by Sutton Bank, Member FDIC, pursuant to a license from Mastercard®. Mastercard and the circles design are registered trademarks of Mastercard International Incorporated. RHF, RHY, RHC and RHS are affiliated entities and wholly owned subsidiaries of Robinhood Markets, Inc. RHF, RHY, RHC and RHS are not banks. Products offered by RHF are not FDIC insured and involve risk, including possible loss of principal. RHC is not a member of FINRA and accounts are not FDIC insured or protected by SIPC. RHY is not a member of FINRA, and products are not subject to SIPC protection, but funds held in the Robinhood spending account and Robinhood Cash Card account may be eligible for FDIC pass-through insurance (review the Robinhood Cash Card Agreement and the Robinhood Spending Account Agreement).

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