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What is a Real Estate Investor?

Article Details
  • Written By: Malcolm Tatum
  • Edited By: Bronwyn Harris
  • Last Modified Date: 15 May 2018
  • Copyright Protected:
    2003-2018
    Conjecture Corporation
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Real estate investors are professionals who enter into various types of transactions involving commercial or residential property, with an eye toward earning a return for their efforts. Investors of this type may choose to purchase real estate as a means of creating a steady revenue stream, or to develop or enhance in some way and sell at a substantial profit. The investor may choose to oversee the investment personally, or contract with a firm to handle the management on his or her behalf.

A common example of real estate investing is to purchase properties with the idea of establishing a steady flow of income. This is true when a real estate investor chooses to purchase one or more rental properties. Over time, the rent paid on the unit or units found on the property offset all the expenses associated with the acquisition and maintenance of the buildings. At that point, the investor begins to realize profit from the venture and continues to enjoy profit as long as tenants remain on the property.

One of the more popular types of real estate investor today is known as the flipper. Investors of this kind look for properties that are run down but still have potential for being restored and sold at a profit. Often, a flipper will look for residential or commercial property that is located in an area of town that is anticipated to shortly become prime real estate. The flipper purchases the property before property values begin to increase, then remodels or restores any buildings located on the grounds. Once the property is restored and attractive, the real estate investor holds on to the investment until the demand for the real estate is sufficient to command a price that results in a great deal of return once it is sold.

In general, a real estate investor who engages in flipping commercial or residential properties wants to experience a quick turnaround with the project. This strategy often makes it possible to acquire the property, fix it up for resale, and sell the real estate at a profit before the first payment on any loans used to acquire the property come due. This allows the investor or flipper to quickly retire all debt associated with the project, pocket the remainder and move on in search of other properties to flip.

In order to be a real estate investor, it is important to have a strong understanding of how property values work and how to accurately assess the potential for return on a given property. In order to accomplish this, a real estate investor must be able to understand what is happening in the local community. For example, if a real estate investor learns that a particular neighborhood is located near what will soon be a major hub in a city or town, he or she may take steps to secure as much property in the neighborhood as possible. Once the property is purchased, it is developed for residential or commercial use, depending on the anticipated development of the general area. If the investor’s speculations are correct, the project could yield a significant amount of profit.

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