“I want to be a real estate investor. Can you help me find a good deal?” is a question I get from real estate “wannabes”. The question should be how do you know what a good deal is? Hi, this is Carmen Cotto-Rivera, Realtor at Vylla Home in South Jersey. So you want to be a real estate investor? Congratulations, you are in good company!
Did you know that 11.3% of residential properties, in the U.S., in 2018, were bought by investors? That is the highest number since CoreLogic started tracking this statistic since 1999. Also, did you know that the mom and pop investor, those that own 10 properties or less, make up 60% of the U.S. investors in 2018? That is more than the professional investor, those that own 11 to 100 properties and the institutional investors, those that own over 100 properties.
Okay. So people tell me all the time to help them find a good deal, but how do you know what a good deal is? You see, you’re not going to find the answer in HGTV or in any of those other flip shows that you find in other networks. You first got to find out what kind of investor you are. There’s basically five types of investors.
Number one is the first time investor, less risky, low return, usually buy a single family, detached home or a condo or a town home. And these properties are bought as rentals, that means “buy and hold”, is what we call it and they become a landlord.
Number two is a move-up investor, usually a first timer or an accidental investor. People that don’t want or cannot sell their home and they end up becoming landlords. An example would be, let’s say you own a condo, you move out of it, you rent it out because you moved into a single-family home that you purchased. So you become a landlord. This is less risky, low return, but now you’re building equity in two properties.
Type number three is a portfolio investor. They’re usually medium risk. They buy one property every one to three years. Usually it’s a single-family, detached home or a two to four-unit residential building. They like to buy multifamily, different types of multi-families, to increase their returns.
And type number four is a performance investor. These are usually medium to high risk. They buy at least one property a year. It could be a single family home or a two to four-unit, multifamily property. They like to buy lots of multifamily properties to increase their returns. And they definitely know their numbers.
Type number five is the rehab and resale investor, AKA, the”flippers”. (We say rehab and resell because it sounds a little more professional). Anyhow, these investors buy as often as possible and they are high risk. Usually, you’re more familiar with these types of investors because they’re the ones featured on the TV shows. They like to buy single-family, detached homes or town homes or condos that need repair, remodel or a complete rehab. They seek out properties that need work and are difficult to sell, so that they can buy them, fix them up and then sell them for a profit.
So if you want to be an investor, the first thing you got to decide is what type of investor you want to be. The one thing common for all these investors is that they know their numbers. So how do you do that? That’s for the next video. This Carmen Cotto-Rivera, Realtor, at Vylla Home, South Jersey. Love where you live and live where you love.