What You Need to Know About Real Estate Investors

The prices of real estate properties generally rise with inflation. In fact, the real estate industry offers opportunities to make good money with the right strategy, approach, and attitude. Being a real estate investor allows you to earn money actively or passively by purchasing properties and generating yields for the long term.

As of September 2022, US home prices were up 7.6% compared to 2021, selling for a median price. And the exciting news is that the real estate market is on its way to recovery after surviving the COVID-19 nadir, which could make home prices even better for real estate investors. Because of this, people in the real estate market are rethinking their strategies on how to make the most out of their properties.

What Is Real Estate Investing?

Real estate investing is the process of purchasing a property with the intent to produce income from it sooner or later rather than buying the property for personal use. A real estate investor usually invests in land, building, infrastructure, homes, or any other tangible property, usually immovable but transferable.

This type of investing can be categorized into two major categories. The first one is physical real estate investments which encompass land, residential and commercial properties. The second one is non-physical real estate investment, which includes real estate investment trusts (REITs), remote ownership, and crowdfunding opportunities.

Investors can also invest in a property to rent it out and earn passive income. In the US, a real estate investment worth $100,000 can yield a gross annual return of over 10% by renting it out.

What Is a Real Estate Investor?

A real estate investor is sometimes called a real estate entrepreneur. As mentioned, they’re individuals who purchase real estate properties to gain profit. Real estate investors also evaluate the real estate market and purchase properties to build wealth. On average, a real estate investor earns between $70,000 and $124,000 a year, but earnings may vary greatly depending on the investment type and how many deals you close annually.

There are two types of real estate entrepreneurs: active and passive. The details for each are as follows.

• Active Real Estate Entrepreneur

An active real estate investor is fully involved in the entire process of investing in real estate, from the acquisition of a property to its renovation to finding a buyer and finally closing a deal. These investors allocate money for renovation, repair, and refurbishments to sell the property at a higher price than its initial purchase price. Active real estate investing can take different forms, from wholesaling to flipping houses.

• Passive Real Estate Entrepreneur

Passive real estate investors are investors that gain passive income through real estate. Typically, these involve investing in REITs, which are like mutual funds. As per federal regulations, REITs must return 90% of profits to their investors.

Passive real estate investors also buy into a real estate investment fund, a process often termed syndication. This process allows a group of real estate investors to pool their financial resources and business expertise to acquire a larger real estate project. One of the risks of real estate syndication investments is that you may need to exit the investment early due to market conditions or personal financial difficulties.

Simply put, a passive real estate investment does not require extensive effort from the investor to maintain.

What’s the Difference Between a Real Estate Investor and a Real Estate Agent?

One of the significant differences between a real estate investor and a real estate agent is that real estate agents need a license to work or perform their duties, while investors do not.

A real estate agent represents another individual or firm and conducts negotiations on their behalf on a property transaction. Agents earn commissions of up to 7% or even more on their deals. Also known as realtors, real estate agents often partner with investors to secure real estate deals.

On the other hand, a real estate investor does not represent anyone. However, they benefit from the difference between the property’s purchase and sale prices. They also work on their schedule and capacity. A real estate investor has the choice to become a hands-on investor or work passively to gain that income.

Real Estate Investor Data in the US

As of 2019, 31.6% of real estate investors in the US are women, while 68.4% are men, according to data from Zippia. Suppose you are on the hunt for real estate investors, you can secure a partnership with them via bank financing, a real estate investment club, crowdfunding platforms, or even online resources via social media.

As a real estate investor, you must possess exemplary communication skills to negotiate deals and prices, money management skills, patience, and enough capital to invest. Seasoned real estate investments operate from the power of financial strength since they can convert surplus cash flow into real estate investments that compound income and returns.

Parting Thoughts

Investing in a real estate property certainly comes with risks. However, having a suitable scheme and action plan can make you a successful investor. Real estate investors cater to strategies according to their respective objectives and the risk-return trade-off.

Most importantly, you must study the real estate market. The US real estate varies significantly in geography, pricing, and more, so you must understand how real estate operates in a particular state where you work to understand your customer base. Having ample knowledge of your target clients will give them an edge on what properties would sell fast and for a reasonable price.

In case you’re looking for one, Shorefront Investments is a real estate investor in the US. They buy and sell almost all types of properties in various conditions. These include land, townhouses, mansions, condominiums, luxury homes, commercial properties, and more. They usually close deals within 7-14 days and provide no-obligation cash offers to those who are selling properties within 24 hours upon viewing. Call (850) 713-4866 or email info@shorefront-investments.com to learn more about their offerings.