This section is from the book "Practical Real Estate Methods For Broker, Operator & Owner", by Thirty Experts. Also available from Amazon: Practical Real Estate Methods for Broker, Operator, Owner.
Edward H. Gilbert
Real property is defined as land and land only; it does not include anything growing out of the land or anything built upon it. Forests, growing crops and buildings are additions to land value, but they are to be considered as ephemeral by nature, and having the characteristics of personal property only. The fundamental characteristic of real property is its permanence. Land is used for all the purposes of man, and its value to him is measured by the degree of such usefulness represented in money. This value is based upon its capacity to produce profit or that form of income known as rent. The value of land, therefore, is its rental value, and its fee value is the rental value capitalized at the prevailing interest rate of money. For instance, a lot which will yield a net annual rental, free of all charges, of $1,000 may be said to have a rental value of $1,000 and a fee value of that amount capitalized at say 5%, or $20,000. The fee value of land is the value of the right to transfer the title, and is the form of value most generally used in this city, where land is constantly changing from one title holding to another.