Real estate investors are often misunderstood. Some people confuse them with real estate agents. Others think they simply buy cheap homes and sell them, with little to no effort. Both ideas are far from the truth. If you are considering working with a real estate investor or becoming one yourself, you need a clear understanding of what they do.
A real estate investor makes money by buying a home at a discounted price and then selling it for a profit. Some investors will also create a passive income by turning some properties into real estate rental properties. Yet the actual work of a real estate investor goes much deeper than this.
Real estate investors are often described as house flippers, because they take a home that is in poor condition, make the necessary changes to make it in move-in ready condition, then sell it quickly for a profit. This requires being able to spot properties with the right potential and price. Investors must be able to find homes that they can make money on, even after putting in the work to renovate or restore the property.
Because real estate investors must put work into properties in order to sell them for a profit, many investors learn how to do the renovations on their own. Those who do not will partner with contractors that can provide the services reliably and affordably. This keeps costs down when renovating properties, while managing serviceable results.
Real estate investors buy many types of distressed properties. Some will invest in foreclosures and short sales, and these investors must be able to identify properties that will not require extensive work. Other investors will buy properties that homeowners simply do not want, such as in the case of a real estate inheritance or a homeowner that needs to sell quickly to accommodate a move or other life change.
Financing or funding real estate investments is another challenge the investor faces. The first few purchases may require a loan or some source of personal funds. Over time, the investor learns how to use the proceeds from past purchases to fund new ones.
Real estate investing involves much more than simply buying and selling homes, although that is the foundation of the process. When done correctly, by a professional team, real estate investing can bring significant benefits, both for the investor and the home seller who benefits from the investment process.