This is Part I of a three-part series on the importance of owning real estate to create wealth.
Homeownership is considered the best engine to create long-term wealth.
Today, housing is the most valuable financial asset for American families, especially homeowners approaching retirement (usually ages 55–64).
Owning a home is considered the cornerstone of the American Dream. Homeownership combines emotional, financial, and community bonds into a single transaction. While homeownership is the basis for the political and social development of neighborhoods and communities, it is also a time-tested vehicle for building the wealth that sustains property owners, their children, and their heirs well into the future.
Researching, evaluating, and buying a residence is also one of the most complex financial transactions most people will enter into in their entire lives. The financing process requires formal, in-depth financial verification of the property’s owners, along with a complete legal description and proof of the building, land, easements, and any special attachments the real estate includes. This process involves all local, county, and state tax and building code authorities, as well as any jurisdiction and special interests in the real estate transaction.
Real estate law dating back to English Common Law in 1066 AD regarded real estate as the only form of wealth. When the Norman king, William the Conqueror, occupied Great Britain in 1066, he took possession of all the land. He then granted temporary use of the land through a system called “tenure” to his followers. With access to the king’s land, people who had tenure could hire local inhabitants to work the land in exchange for rent, goods, or services. With property and the buildings on the land at its core, this became the foundation of the feudal system.
Since the king owned the land and granted access to it by special dispensation, real estate transactions evolved into scrutinized and formalized transactions. Land and property ownership carried special rights to political, financial, and social rank, allowing landowners to charge rent and build businesses based on agriculture, light industry, craft, and livestock production. These special rights gave tenure holders economic and political power, backed by evolving English Common Law provisions related to property use and property rights.
While real estate laws have evolved significantly since the 11th century, real estate ownership in the U.S. today is grounded in English legal theory and case law. This includes the special status of real estate property ownership, relationships with mortgage firms, and the local community’s jurisdictional scope and taxing authorities.
With this backdrop, this article argues that real estate and homeownership, in all their forms, should be considered the best wealth-building engine available to average Americans. While homeownership spans everything from basic shelter from the elements to condos and luxury homes built on acreage, it shares common financial traits that deliver benefits.
Ownership also changes over time as its owner ages, retires, dies, or becomes ill. At each significant stage in this human lifecycle, the benefits and obligations of ownership become evident and accessible.
Real estate ownership, in all forms, also carries both pros and cons, including assets and liabilities. This means real estate ownership, in most forms, requires owners to manage insurance, taxes, maintenance, depreciation, repairs, replacement, and inspections. These expenses are associated with real estate ownership, but they are necessary to take advantage of the many benefits it offers.
This next article will look at homeownership, what it offers, and its financial benefits as a powerful engine for building wealth.
