What kind of Real Estate Investors are you?

Real Estate Investment can be extremely complicated.
To find the right price that worth investment in this market usually hard to come by. A major factor behind this is the type of investors who put their money in the real estate markets. Therefore, an understanding of the real estate markets has to be rooted in an understanding of the underlying participants as well as their motives.

What are your Investment Motives?

The most important feature based that we could distinguish real estate investors for each other are their investment motive. All investors buy real estate. However, not all of them do it for the same reasons. Let’s have a look at the three major categories of investors in the market.

Are you a Property Speculator?

These are the type of investors should not be called “investors”. They give a bad name to property investing. If you read their statements their claims, they will make you think that property investing sound like a no brainer. These are the people that claim to have made a million dollars in 4 years without any investment of their own simply by flipping real estate. The truth is that such results are almost never obtained. Real estate investment is an old school investment game which only pays off in the long run. Most of these speculators are either people trying to make a quick buck by selling their phony “surefire real estate profit strategy” or people who have fallen prey to these con men and are trying these phony strategies in the market! This category is very common in Thailand.
Does Property Condo Speculators are buying many condo units from the developers on early stages when the project is just been lunched and hope to flip the property to a real buyer before the project is completed. In this case the Condo Speculator doesn’t need to put the full amount of the condo upfront and only required to pay the deposit and some low instalments. In many cases the Condo Speculator is stack with the property as the speculator cannot find a buyer due to the over supply in the market.  

Are you the End Users Investor?

This is the most common category of investors that you will find in the real estate market. Usually people who buy real estate are buying their own homes. They have the intention of staying in the house for decades. This changes their outlook towards the investment. These people do not look at real estate as a purely Business Financial decision. They look at it as a lifestyle choice. This is because they have to stay in that house day in and day out. Hence, factors such as lifestyle amenities available nearby as well as the distance it takes to commute to work become extremely important. The demand for these kinds of investors can be predicted based on where their job locations currently are or are expected to be in the near future.

Are you a Long Term Investor?

The long term real estate investors or Property “flippers”.
These people make Property Investment as a Business, Invest in the real estate market to make money! However, their decisions are not short term. They understand that real estate is a slow moving and growing, illiquid kind of asset that steadily grows in value over a number of years. Many corporations are also present in the real estate investment business.

Degree of Control

The long term investor category can be further subdivided into two more categories. These categories are distinguished based on the degree of control they exert on the property in question.

Are you an Active Investors? 

Some long term investors prefer to manage the property themselves. They are the ones who conduct the repairs, find the tenants and rent out their properties. Also, they may be actively involved in the property management process and may visit the property several times to ensure that no damage has been carried out by the tenants. Since they actively participate in the investing process, they are called active investors.

Are you a Passive Investors?

There are other long term investors which have the ownership of the property. However, they do not take interest in managing its day to day affairs. To do so, they either hire employees or they end up hiring professional real estate management firms. Since they play no role in maintaining the property, they are called passive investors. They just provide the cash flow for financing the property and make very few (if any) decisions regarding its management.

Are you a Legal Entity Investor?

Lastly, the type of real estate investors can also be distinguished based on the type of legal entity they are. Legal entity is important because it determines the amount of liability that a person has.

Individual Investors: Most of the investors in the real estate market are individual investors. Individual investors have an unlimited liability. This means that if they undertake a mortgage on one house and default on it, their other assets can be liquidated to make good the loss.

Institutional Investors: There are many institutional investors in the real estate market as well. These institutions usually finance themselves by issuing long term bonds in the bond markets. Since these bonds have a secondary market, they are very liquid and provide the investors with the ability to enter and exit the real estate market without any major hassles. While, in terms of number, individual real estate investors may outnumber the institutional investors, in terms of scale or volume, they are no match for the big corporations who invest billions of dollars in real estate investments.

Real estate market, like the other markets, is therefore complicated. It has various investor groups, who have different motives and based on the competition and co-operation between them, the real estate prices are set.