What type of Real Estate Investor Are You?
There are 4 basic types of real estate investors:
- Safe & Secure Investor
- Moderate
- Risk taker
- Full Time Real Estate Dynamo
- Safe Secure Investors
Safe Secure Investors own their homes. Slowly and little by little month by month they made that first of the month home loan payment and now they are sitting on top of a very nice nest egg. They do not altogether rule out investment in more properties but they are highly against using their own house as collateral to take out another home loan. To them the risks are not worth the benefits and they will not get into any new real estate investment opportunities unless it’s a sure shot assured return opportunity. Besides these investors also have their retirements to think about.
- Moderate Investors
Moderate type of investors often own one or two other homes apart from their own home. They take informed and calculated steps. To these people their own investments are not so great and the grass is always greener in other people’s deals. They usually hold very safe properties in stable areas of the city where the growth in value year on year is moderate and the rents are quite staid too. But when they decide to sell they know that they will atleast get what they put into the property.
- Risk Takers
Risk Takers always see possibilities ahead of potential drawbacks. For such people money is not just the goal but something that should be used to get something better in life. On paper they make more deals and make more profit than moderate investors. With their talent and experience they tend to look at every deal from every angle and can discern the hidden value that is locked in certain properties and also the hidden dangers in others!
- Full Time Real Estate Dynamos
As the title suggests this class of investors eat, sleep and drink real estate. They are extremely passionate about the world of real estate and when they are not structuring deals for themselves they use their knowledge and experience to help friends and families gain from their valuable insights. Unlike some people who never see opportunities, Dynamos see so many opportunities everywhere that they have to stop themselves from acting on every one of them. Dynamos have a solid foundation in real estate and take quick and affirmative action. Their outlook is that they have nothing to lose and everything to gain.
It is plain to see that these four areas of real estate investing is held by four different personality types – cautious, content, bold and fearless. But instead of perceiving them to be four different stereotypes of real estate investors you can view them as four levels of real estate investment through which all investors must pass as they develop their skills and sharpen their instincts.
I am not saying that every real estate investor must pass through these four levels but if you want to become a super real estate investor making tens of crores or even more profit every year these are the levels through which you are most likely to pass.
So at which of these four levels do you see yourself as an investor right now? The answer to that may depend on your risk tolerance levels. If you are risk averse then you are at level 1. If you can withstand limited risk then you are at level 2. If you have a more devil-may-care personality you may start out at level 3.
There is nothing wrong with being cautious. As with any kind of business, being cautious is a highly crucial skill that pays off in real estate especially for beginners. But these levels can also overlap. Some highly experienced investors are also sometimes paralysed by extreme caution and always remain so. Lifelong type 2 investors often lack the drive and discipline that motivates others to become type 3 risk takers as they gain in confidence.
How do you end up at Level 4 viz. a full time successful real estate investor making crores in profits every year. Well one success leads to another. Over time you learn to identify opportunities and take quick decisions. You begin to acquire the knowledge that you need to change your life to change your income for the better. You begin to control your fears. You acquire experience after buying and selling many properties and you become a full time dedicated real estate investor. And more importantly you begin to trust yourself.
Some full time real estate investors hardly try or even care about achieving level four status. And yet they are highly successful. Some level 4 investors enjoy doing real estate investment part time – almost like a hobby. They are part time investors because they cant or don’t want to give up a rewarding main career and plunge into real estate investing full time. The extra money they make from their part time hobby works perfectly fine for them.
Some investors stick with one niche aspect of real estate (such as flipping) throughout their lives and are perfectly content with this. Some real estate investors even have specific short term goals such as to pay for their children’s education abroad or save for their children’s marriage or buying a vacation home for their retirement. And then once the goal has been achieved – walk away from this activity for good.
There are many ways to get into the game of real estate investing. To spread the risk or to become involved in larger projects you can invest with other people. Heck you can even start off as an investor and then move on to become a developer of housing projects! If you are taking other people’s money or pooling together money with other people to invest in property or land, everyone must understand the risks involved and the fact that profit is never guaranteed.
You do not necessarily have to become a “dynamo” to realize your real estate goals. As long as you get started you will start understanding the ways in which every real estate transaction has the potential for either profit or loss. You win and sometimes you lose. Even risk has a lighter side because life is no fun without some risk!
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