Real Estate Investor vs. Real Estate Agent: Which Option Is Better for You? (2024)

FAQs

Real Estate Investor vs. Real Estate Agent: Which Option Is Better for You? ›

Real Estate Investors Do Not Earn a Commission

The agent will make more money on higher sales prices, naturally. The investor, on the other hand, does not make a commission. Instead, they will make money by finding deals where they are able to get the properties at a good price. They will then find ways to make money from the property.

A property investor is one who buy/sell/rent homes for the purpose of making a profit. A real estate agent is a person who helps other to buy/sell/rent their homes and then the agent collects a commission from it.

On its own, real estate offers cash flow, tax breaks, equity building, competitive risk-adjusted returns, and a hedge against inflation. Real estate can also enhance a portfolio by lowering volatility through diversification, whether you invest in physical properties or REITs.

Investing in real estate can be a good idea if done thoughtfully and strategically. It offers the potential for steady income, capital appreciation and tax benefits. However, it's not without its challenges, including high initial costs, property management responsibilities and market risks.

Real estate investing may make sense if you want to own tangible assets and are willing to manage property. But if you prefer a more hands-off approach with more liquidity, stock market investing may be a better option.

Investing in real estate can be a success, but going it alone can be challenging and highly risky. Joint ventures, wholesaling, and property management are just a few ways investors can profit from real estate. It also takes a little savvy to become successful in this highly competitive sector.

The most common way to make money in real estate is through appreciation, an increase in the property's value. Location, development, and improvements determine real estate appreciation. Real estate investors commonly rely on income from rents for residential and commercial properties.

According to Nicolais, real estate investing is a career that offers advantages you won't find in many other types of work.

Real estate investors purchase real estate with the intention of holding properties and gaining financial return. Typically, real estate dealers acquire and sell real estate as part of their everyday business.

What is a disadvantage of real estate investment? ›

Real estate investments tend to have high transactional costs, especially in legal and brokerage fees. The process of acquiring a new property is also very long and tedious with lots of legal formalities. Another disadvantage of property investments is that they are not easy to liquidate.

Some of the most successful entrepreneurs in the world have built their wealth through real estate. In fact, it's estimated that 90% of all millionaires invest in some form of real estate. There are several reasons for this, but in today's article, we'll share seven reasons why millionaires invest in real estate.

If inflation continues to fall, interest rates will be cut, and high demand will increase. The housing market is predicted to improve overall, and it may be a good time to invest in real estate. Fortunately, for those beginning their search for a home, experts predict a slower increase in home prices this year.

If you're not in a rush, and your home is in perfect condition, it may make more sense to work with an agent. Other times, if you're looking for the fastest sale, want cash, or don't want to spend time and money on repairs, staging, or commissions, an investor may be the most convenient and effective choice.

Investors often have high expectations as to how and when they are repaid, as they now have partial ownership of the business. Investors can hinder the decision making process as their primary focus may not be business success, but rather their own personal investment.

Key risks include bad locations, negative cash flows, high vacancies, and problematic tenants. Other risks to consider are hidden structural problems, real estate's lack of liquidity, and the unpredictable nature of the real estate market.

However, real estate investing can also be stressful. You need to find the right property, deal with tenants, manage contractors to make repairs, and navigate through a host of legal, tax, and accounting information. Because of that, buying a commercial property isn't for everyone.

Historically, the stock market experiences higher growth than the real estate market, making it a better way to grow your money. Stocks are more volatile than housing, making real estate a safer investment. Stock earnings are taxed as capital gains when realized. Stocks have no tangible value, whereas real estate does.

If you choose to be a real estate investor, you could own one or more properties, or pool your money with other investors into a fund that includes several properties. You earn money when properties in the fund are sold. You may also earn income from the rental of the property while holding the asset.