BiggerPockets

Are You Really A Real Estate Investor

Real Estate Investing is a very broad term and includes an almost bewildering array of options. Let's take a closer look at the concept of real estate investing.

The definition of investing is "to put (money) to use, in something offering potential profitable returns, as interest, income, or appreciation in value".

Real estate "investing" frequently includes far more than just investing. It also includes running your real estate business. This is where many people become disillusioned or frustrated.

Compare real estate to the stock market. When you invest in a stock the market tells you the current price. You can only decide to buy or sell, and at what price. You generally can't buy stock at a discount to its current price, or make improvements to increase the value of your stock. Real estate allows you to buy at a discount, and then use your personal knowledge, skills, and efforts to create additional value. You are in control. On the other hand, your stocks don't ask you to deal with contractors, advertising, tenants, or vacancies. Your stock portfolio doesn't ask for additional money to fix a roof or a water heater. When is the last time your stock called you on a Saturday afternoon because the furnace didn't work? A stock is a pure investment. Real Estate investing is really a business that MAY also involve an investment.

As a business, your results are based on your efforts and decisions. To make good decisions, you need to understand that Real Estate Investing is a business and needs to be treated as one. Compare the most common real estate businesses to other non-real estate businesses. If you are wholesaling, you're a distributor. Retailing is primarily the construction business. Landlording is the rental business (big surprise!). You are running a business. Your business simply has an expensive product in a fixed location.

Don't let the terminology mislead you. Most people who think they are Real Estate Investors are really running a Real Estate Business.

Comments