Real Estate markets are extremely complicated. The price movements in this market are usually slow and difficult 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. We will have a look at these factors in this article:
Investment Motive :
The most important feature based on which we can distinguish real estate investors is their investment motive. All investors buy real estate. However, not all of them do for the same reasons. Let’s have a look at the three major categories of investors in the market.
Speculators: These are the kinds of investors that should not be called “investors” in the first place. They give a bad name to real estate investing. This is because if you read their blogs and believe their claims, they will make a sophisticated operation like real estate 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 actually trying these phony strategies in the market! This category of investors was hard to find just a few years ago. However, of late, they have become a lot more common.
End Users: 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 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.
Long Term Investors: Lastly, we have the long term real estate investors. Like the “flippers”, these