Landlord or Real Estate Investor: Which One Are You?

Is there really a difference between a landlord and an investor? And more importantly, does it even matter?

Let’s talk about it.

The Difference Between a Landlord and an Investor

Understand: both own real estate—it’s four walls and a roof. However, that is where the similarities end and the differences begin. It’s the way the business is running inside those four walls and roof that really makes the difference.

Now, your mindset can be your greatest asset, or it can be your worst enemy.

Is there really a difference between a landlord and an investor? And more importantly, does it even matter?Let’s talk about it. To be sure, there’s no right or wrong way to run your business. But it’s important to understand definitions, and it’s important to understand how you want to run your business.

See, a landlord is someone who is trading time for money. They are doing a lot of things on their own. They are a one-stop shop.

They do everything. They do it from beginning, and they do it all the way to the end. Everything starts and stops with them.

Again, there’s nothing wrong with that. But the challenge with being a landlord is you are doing everything on your own, and you are only going to excel to the level of your competence (or to your level of incompetence). Make sure that you realize that when you are doing something. There is no one there to tell you if you’re doing it right or wrong.

Now, an investor has a team. They are trading cost for time. They value their time more than they do the money that they would be saving. These are people like contractors, Realtors, property management companies, inspectors. You name it, and they are leveraging it out.

They are sitting behind the desk, thinking about how they can be more successful, as opposed to a landlord that is out in the field doing it.

The biggest challenge of being a landlord is it is not scalable. We all only have 24 hours in a day. And if you are not using those 24 hours as effectively as possible, you are missing out on opportunity. See, an investor is using scale to leverage out other people’s time, so that they can be more effective and focus on what they’re doing.

And again, if you want to be a landlord, that is fine. But make sure that you create some policies, some procedures, and some structure to wrap around your business model, so that you are not the limiting factor. The biggest challenge with landlords is you become the bottleneck yourself, because you run out of hours in the day. And that is something that nobody can help you with.

Again, there is no right or wrong way—but just make sure that you have a plan.

Take the time to sit down before you even start buying properties—or before you buy any more properties—and create an end destination of what you want your business to look like. Write down some policies, some procedures, some structure. Make sure that even if you are doing it all on your own, that there are other people who could pick it up and carry on—that you are not doing it all on your own.

Now, if you’re an investor and you want to scale, I would say start hanging around different people who can help you scale to the model that you want to get to. It is all about mindset. It’s not about doing. You’re only going to be able to do so much, but you can think and leverage as much as possible.

The Bottom Line

So, just understand this: If you want to be an investor or if you want to be a landlord, make sure that you are aware of the full scope of it all. The difference is you’re basically trading time for money and you are not able to scale if you stay on as a landlord and you’re doing it all yourself.

Make sure that when you get involved in investing and are really thinking about this, you think about how you want your life to be and how much free time you aspire to have. How much do you have now? And if the answer is not a lot, then maybe landlording is not the best way.

If you don’t have a lot of money and you need to save that, then maybe the landlord thing would work. When investing again down the road, revisit this and think it through first before you actually start doing it. That way, you will have much more success in the future.

What are you goals? To be a great landlord or to be a great investor? Do you think it’s possible to be both? Do you agree there are limitations?

Let’s talk in the comment section below.

Note By BiggerPockets: These are opinions written by the author and do not necessarily represent the opinions of BiggerPockets.