Are You Really a Real Estate Investor?
At a small lunchtime gathering of real estate investors last week someone made an interesting comment. The conversation had turned to the topic of wholesaling and then rehabbing and flipping properties. The comment was very simple on the surface – if you didn’t actually hold on to properties were you an investor, or did you merely have a real estate business?
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A Real Estate Business
If someone says they have a real estate business you think of mortgage brokers, real estate agents, title people and the like. Their business is obviously centered around real estate transactions in some way. A wholesaler who places properties under contract and then assigns the contract to the end buyer also has a business based on transactions. Someone who acquires properties to rehab and flip is also in a transactional business. The length of time involved is significantly longer but it still isn’t investing.
The point that was being made is that a real estate business, like any other business, has to be tended to constantly. As soon as the transaction, sale, loan, or project is completed you need to do it again. Much like a job, you are trading money for time and working for your money. If you don't have another transaction lined up you are out of business.
The Business of Investing
Make no mistake, investing is a business as well. An investor’s business is looking for opportunities to put his or her money to work. As an investor instead of working for money, the money is working for you. An investor can have a team in place so that it can truly be a hands-off business.
Plenty of people get into real estate because they envision a lifestyle free from the chains of the working world. If you do not have a lot of cash it is almost impossible to start off as an investor. Instead you can start a real estate business that not only allows you to build the cash needed, it puts you close to the action where you can spot opportunities as they come along. Hopefully you’ll be in a position to take advantage of one of these opportunities at some point.
An Investor’s Life
Years ago I started a real estate business of rehabbing properties. Eventually I did a rehab deal that turned out so well that I became an investor. While still rehabbing properties, I know hold a number of rentals. I’ve also sold properties with seller financing and now hold mortgages, which is another form of passive investing.
Last year I went on a cruise for two and a half weeks. With a job or business that would have meant lost income. However, as an investor I still had rents being paid and interest on mortgages earned. That truly is having your money work for you. If you have a real estate business, isn’t it time you became an investor?
How many millionaires do you know who have become wealthy by investing in savings accounts? I rest my case. – Robert G. Allen