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Real Estate

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Real Estate Investor

There are different types of investors in the real estate market. The market is humungous, and participants in this market all have similar goals, i.e., to earn a handsome return by investing in the real estate market. We will discuss each one of them but before, let's understand who is a real estate investor anyway?

Who is a real estate entrepreneur or investor?

A real estate entrepreneur or a real estate investor is someone who actively/passively invests in real estate.

There are three criterions based on which we can divide real estate investor/entrepreneur:

Legal Structure: Real estate investors can be distinguished by the type of legal structure in which they operate. It helps in determining the amount of liability they have.

A. Institutional Investor: Institutional investors are big corporations who invest lump-sums in real estate investments. These institutions typically issue long-term bonds to finance themselves. Bonds have a secondary market, which makes them liquid and provides investors the ability to easily enter and exit the real estate market.

B. Individual Investor: Individual Investors in the real estate market are retail investors with unlimited liability. This means that their personal assets can be attached in case of default. 

Degree of Control: Real estate investors can be distinguished based on the degree of control on the property.

A. Active Investor: Active real estate investors purchase and manage properties for rental income, or renovate them to change the properties for gain. Active investors may invest in a land parcel and carry out construction activities to build real estate properties for sale. These investors are actively involved in the property management process and have a hands-on approach for every deal referred to as Active Investors.

B. Passive investor: There are other investors which have ownership of the property. However, they do not go about managing its day-to-day affairs. As they virtually play no role in managing the property, they are known as passive investors. These investors only provide the cash flow for financing the property and take minimal decisions regarding its management. 

Investment Motive: Real estate investors can be distinguished based on their purpose or motive of Investment.

A. Long Term Investors: Long-term investors also invest money in real estate to make money over a period of time. They think that real estate is a slow-moving, illiquid kind of asset that will give them a decent return after holding for a considerable period. Many corporations also invest in real estate for business purposes as well.

B. Speculators: They are the kind of investors that should not be called “Investors” as they invest just for a short span of less, usually less than a year and sell as soon as its value appreciates.  

C. End-User: These people buy real estate for their personal use. Generally, people buy a home to live in for years. People look at their home as a factor to depict their lifestyle. Hence, Availability of Basic Amenities, distance to the workplace are important factors before buying any property. 

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