Friday, September 16, 2016

Landlord vs. Investor

What’s the difference between a landlord and investor?  

A landlord is someone who buys houses and rents them out.   They do this for the purpose of cash flow and wealth creation.   

The landlord typically looks to build their portfolio one building at a time, starting small by maybe buying a house or duplex, and living in one side.  They’ll maybe set the goal of buying a new house or small apartment building every year or two. 

It’s the slow boat to China for wealth creation, and it’s not an active business.   It’s a passive business for the landlord.   The landlord typically has another source of income through a regular job.   This is the client the banks serve.   Banks love to make loans to landlords because typically they have good credit and they have another source of income besides the property.  

The landlord will use their own cash to fund their purchases and down payments.  It oftentimes will take them 20 or more years to amass enough equity and cash flow to replace their income to afford the lifestyle they want.  

There’s a difference between a landlord and an investor.

An investor is an active pursuit to become an expert in the niche.   Investors want to be the best home-flippers or best buy-and-hold real estate professionals in their selected market.  They are either dedicating full time resources or are rapidly moving toward full time to their craft.  Investors spend hours analyzing the market in order to know better and more than any other professional the values in their market.   

Investors don’t rely upon agents to find deals, because they know the best deals aren’t privy to most agents.   They find deals on their own.   Investors own their success.  Landlords rely on others for their success.   Investors use other people’s money for their investments.    And to that end, they have a fiduciary responsibility to their capital partners.   The quality of their relationships with their investor clients defines their success, and they protect those investors at all costs.     

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