Different types of Real Estate Investors

We've had a couple of successive posts about real estate investors here... here's another one:

What types of real estate investors are there out there?

Several.

1. Flipper. This is a guy who buys a property, never intending to live in it, most likely never intending to even make a payment on the mortgage. Sometimes he signs a purchase contract, never even intending to CLOSE on the deal. His intention is to get in and get out as fast as possible - making as much one-time profit as possible. He's not opposed to selling the CONTRACT to purchase, in a hot market.

2. Fix 'n' Flipper. This guy buys a distressed property, usually by marketing to home owners who are in distress. He's looking to buy the home, usually at less than what is owed to the mortgagee. If he makes a low offer, the owner must go to his lender and basically say, "You can accept this offer from my buyer, or you can foreclose on the property next month." Most of the time, if the offer is even SLIGHTLY realistic, the bank will accept the offer, because they are in the business of lending money, not owning crappy homes. The new buyer, or flipper, will get a rehab loan, where there is money built into the loan for the fix up, and often "selling costs" as well. If he's good at what he does, he will not likely have to make a payment on the loan before he has it fixed up and is ready to sell. Since he's also included selling costs in the loan, he's also paid for the RE Agent as well.

3. Buy Back Lease Holder. This is a guy looking for the same distressed owner as the Fix 'n' Flipper above. He will make an offer to buy the home at either exactly what is owed, or even lower, with the agreement that the current owner may stay in the home, lease it from him, and in a year or two, buy it back from the lease holder for fair market value. This gets the seller/owner out of a bad loan, allows them to stay in their home, and gives the new owner a positive cash flow for the time period the sellers are going to live in the home, and a nice chunk of profit when the new/old owner is ready to buy it back from the investor. A guy can make a comfy living on 10 of these per year, if he does it right.

4. Landlord. This guy is looking for properties, usually higher density than single family homes, like 2- or 4- plexes. But there are those who buy single family homes as rentals as well. His goals are long term stability through the tenant/landlord relationship. If he had the money, he would buy a 100-unit apartment complex. Many of them. He will diversify his holdings, leverage them on future purchases, and strive to borrow "full-doc" money (best rates/terms available), and will not buy anything that looks like it will produce a negative cash flow on a monthly basis for him. He's building his retirement holdings, one day at a time. He'll quit his day job 7 years from now. He's a VERY high net-worth individual. He's a corporate businessman.


There are other types of investors out there, variations on the theme, but these are the main categories. There are also those who dabble in more than one type of investment, seeking to be diverse. This takes time, practice, and an aversion to risk. A good investor understands the risks/benefits of each type, and plans his actions accordingly.