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The Different Types of Real Estate Investors


different types of real estate/ property investor

Real estate investment has always been a popular investment type for aspiring investors, and it is versatile for people seeking real estate investment, regardless of whether it is an institution, individual, short-term or long-term investor. Real estate is a resource that will appreciate and returns over time. It is even true due to the rapid development of cities, the value of real estate has become increasingly higher and higher over the year.

Here are different types of real estate investors based on the different expectations and needs:

1. Different investment motives

Property Speculators

An investor can also be a speculator. However, speculators primarily focus on high capital appreciation by taking high risks and short selling trading strategies. They usually take a very close look at the key areas or developments that can bring rapid returns.

Speculators usually will do market forecasting and use their ability to purchase the property at a discount. From there, they can prevent possible risks and allow them to sell their property with more considerable price differences. They usually buy property for a short time, keep track of the market, and employ strategies to ensure they profit from the price changes.

Long-Term Investors

This kind of investor usually looks for investment opportunities that are more secure and stable. This involves a lot of considerations, maybe even more than the serious speculators, as it takes up a long span of time.

Long-term investors seek to enjoy the stable growth of the property as an asset and secure their original capital while seeking potential capital appreciation. While commercial property offers an excellent revenue, residential investment remains the most popular and accessible path to property investment for many. Popular residential areas have enjoyed substantial growth over the last few decades, and it has become a belief for many in its potential returns. This explains why a significant number of investors choose to make long-term investments in property.

Short-Term Investors

Any investment that lasts for 12 months or less is a short-term investment. Short-term investors look for quick returns on their investments. There are three popular ways to invest your property in a short period: short-term rental, fix and flip, and P2P.

It has a relatively higher risk than long-term investment as it looks for quick property turnover with decent value return. Not only that, it requires a lot of work in a short amount of time, including financing, negotiating, and so on. Hence, it is more suitable for people who don’t mind taking risks and are willing to be involved in their investments.

2. Control towards the investments

Passive investors

How could one passively invest in real estate? To generate passive income through real estate, you can invest in a real estate investment trust (REIT), which is like a mutual fund. Holding stocks in a real estate portfolio means you have indirectly invested in real estate.

Another approach is to buy into a real estate investment fund, which is often referred to as syndication. The developer will pool investors' resources and deploy that capital across various real estate projects depending on the fund's goals.

By adopting the methods above, the investors don't need to do anything by themselves but sit back and collect the income accordingly.

Active investors

The term “active investors” itself is relatively self-explanatory. It is when the investor involves in the investment process. Active involvement can range from wholesaling to fix-and-flip. It heavily takes up the investors’ time and engagement.

For example, if you are a landlord holding 40 properties in hand, those properties need to be checked and maintained from time to time. Suppose you have tenants within half of your properties. In that case, you also need to take responsibility for taking their deposits, some ongoing financial commitments, and any impromptu problems the tenants are requesting.

Apart from the example, other types of active investors will do renovation and refurbishment and lease the units by themselves. All these require tons of time, energy, capital and risks.

3. Legal Entities

Institutional investors

They are the giants playing in the property industry. Real estate investment funds, mutual funds, insurance companies and banking institutions are institutional investors. To secure its capital pot, each institution must demonstrate above-market returns, and it has evolved into a competitive market over the years.

Their substantial size and expertise also mean they have a lot of experience in real estate investment. They hold significant access to information which guides their investment decisions. Deeper pockets and broader focus signify that they work on a much larger scale than small individual investors.

Individual Investors

Individual investors are everyday people who invest in securities on a personal level. They can be retail investors or high net worth individuals. Unlike institutional investors who invest on behalf of their clients or members, individual investors typically invest for their interest and benefit. They have relatively limited capital compared to those giants in the market.

Due to the limitations, individual investors have much lesser access to market information. It often involves a broker acting as an intermediary between the investors and the securities market, which takes up a part of the costs.

4. House flippers

House flippers are a unique example of short-term investors. They gain good returns through hard work and the improvement of their properties. They aim to buy a house that needs much renovation, improve it, and sell it at a notably high price. As it involves a lot of time, energy, and capital, it is a full-time job in most instances.

One thing to ensure for house flippers is to not overspend on the renovation fees, as the costs of it will also be taken into account when deciding the price to lease after all the renovation works are done.

So, What Kind of Investors Are You?

All sorts of investments come with risks. Although real estate investments have always been substantial in the investment market, they still don’t guarantee a return.

Regardless of which kind of investors you belong to, just like any other financial decision, you need to do comprehensive market research, a thorough understanding of the market and much more complex work.

So, remember that the most significant rewards are often received from the tremendous effort.

Looking for the next real estate to invest in? Or you are still unsure about how to start your journey in real estate investment? 

We are here to help! Contact us for more details.

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