Real estate capital

Real estate capital is all real estate, whether rustic or urban, of which ownership is owned. So also are those assets of which the real right and the power of use is possessed.

Real estate capital

Real estate capital, in other words, is the set of real estate, regardless of its nature, that is owned by a certain person.

In summary, let’s imagine that a person owns a house and a business premises. Both properties would be part of the real estate capital. At the end of the article we will see more developed examples. However, it is necessary to simplify the concept to know what we are referring to throughout this article.

This type of capital is well known for the tax it receives, as well as the returns it generates.

Returns on real estate capital

The returns on real estate capital are the full returns from the ownership of rural and urban real estate. In the same way, they include the real rights that fall on them, derived from the lease or the constitution or transfer of rights or powers of use or enjoyment over them.

In other words, return on real estate capital is the name given to the generation of income from the operation of a property. In this sense, it includes the capital that a person receives for the rental of a property.

Any income generated by the exploitation of real estate will be computed as real estate capital, having to go in the declaration (for the tax authority) as income from real estate capital.

Once the income and expenses have been accounted for, the income from real estate capital is integrated into the tax base of the Personal Income Tax (IRPF), as this is taxed as one more income for the year.

Types of real estate capital

The main types of real estate capital are the following:

  • All those real estate owned, regardless of their name or nature.
  • Real estate on which a real right falls.
  • Real estate over which you have a power to use them.

Differences between movable and real estate capital

Although it tends to generate confusion, the main difference between movable and real estate is in their name.

That is, while real estate capital is that set of real estate that is owned by a certain person, movable capital is that which is made up of movable property.

In other words, movable capital refers to a series of goods that can be easily transferable and have the ability to be quickly converted (into other assets, for example). While, on the other hand, real estate capital is those assets that do not have that ability to be easily moved.

For example, movable capital could be considered cash and financial assets.

Examples of real estate capital

Here are some examples of what real estate is, as well as an example of what might be considered income subject to return on real estate.

Let’s imagine that we have a home and a business premises. The house is destined for personal use as a family residence. However, we have rented the premises to a home furnishings store, which pays us $ 700 per month for the right of use.

The real estate capital that we own would be the value of the home, as well as the value of the property intended for commercial rental.

Likewise, that income of $ 700, from the rent, once everything has been calculated, we are responsible for taxing it as income from real estate capital.