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What Are the Different Types of Investors in the Real Estate Market?


Different types of investors can be categorized based on several metrics in the real estate world.

Whether it is the motive of your investment, its duration, its size, or the type of property you’re investing in, as a real estate investor, you should be aware of what category you fall under as it can allow you to further understand your role in the market, and how that role can be enhanced depending on your ambitions.

These are the different types of investors in the real estate market:

Different Types of Investors: Motive

When thinking about the different types of real estate investors, one must take into consideration the motive behind the investment.

While it is natural to assume that anyone investing in real estate is doing it for the money, because that’s what we relate investing to, it must be noted that anyone dealing with real estate, whether buying or selling a property, is considered a real estate investor regardless of their motive.

There are the two different types of investors with regards to the motive:

  • Residence:

    By saying residential, I don’t mean people investing in residential properties. When I say residential real estate investors, I am referring to people who invest in a real estate property with the purpose of residing in it. This is the most common type of real estate investors simply because everyone eventually purchases a home to live in, which makes everyone fall under this category, including people who invest in other properties with the purpose of making money while also owning a home to live in.

It must be noted that most other types of real estate investments rely on the dynamics within this category of real estate investors, as people in need of a residence are the clients and customers of the real estate market.

Related: What Are the Major Incentives to Buy and Rent Residential Properties?

  • Profit:

    Real estate investors who are in it for the money are income investors; they base their investment decisions and strategies around the concept of making a profit. This type of real estate investors includes all different types of real estate investors, besides the residential ones, regardless of the duration of their investment, the size of it, or the type of property that they are investing in.

Different Types of Investors: Duration

When it comes to profit investors, there are two major categories that they can fall under it with respect to the duration of their investment.

Some investors prefer to make a profit on their investment at the soonest possible opportunity, while others prefer to patiently wait and build up the success of their investment over time in order to collect guaranteed rewards.

Different types of investors with regards to duration can fall under two categories:

  • Short-Term:

    Investors who are looking to make quick profits on their investments are called short-term investors. This type of real estate investors tends to rely more on buying and selling real estate properties instead of holding the investment to generate passive income.

While there are different types of short-term real estate investments, the most common type is fix-and-flips: purchasing a property for the sole purpose of renovating and improving it in order to increase its value before selling it at a higher price for a margin of profit.

  • Long-Term:

    The more common type of real estate investors is long-term investors. This type of real estate investors relies heavily on rental properties, whether it is residential, commercial, or even industrial properties. This type of investors use long-term investment strategies and financial planning in order to achieve a positive cash flow and a passive income from their investment.

While it is possible for long-term investors to branch out into multiple rental properties to achieve a higher profit, a large portion of long-term investors may only own a single rental property their entire lives.

Related: The Snowball Method in Real Estate Investing

Different Types of Investors: Size

Different types of investors in the real estate market can be categorized with regards to the size of their investment. While most real estate investors are individuals trying to make a living or a small profit from their investment, some investors come in the form of large companies and firms investing in big projects that are worth millions of dollars.

  • Individual:

    Individual real estate investors are simply common people like you and I. And while individual investors typically do not have a large enough amount of cash on them to compete with large firms and companies, individual investors may retain more control over their investments and their properties, and the profits they make through their investments are more easily managed and planned around.

  • Institutional:

    Large firms and companies that deal with real estate are referred to as institutional real estate investors. While individual investors easily outnumber institutional investors, in terms of scale and size of the investment, individual investors are no match for corporations that make million-dollar deals on a regular basis.

Different Types of Investors: Type of Property

One cannot consider the different types of investors in the real estate market without taking into consideration the different types of properties that investors are engaged in. There are several different types of real estate properties, and as many different types of investors depending on the kind of property they are investing in:

  • Single Type:

    Some investors, mostly individual investors, invest in a single type of real estate properties. This means that if an investor started out investing in a residential property, and eventually he/she decides to grow his/her investment and branch out to multiple properties, his/her property of choice will always be residential real estate.

This allows the investor to build up more confidence and practical experience along the way without having to make investments that he/she lacks sufficient knowledge about. Most residential property investments, for example, are based on the same factors and require similar planning processes. This allows the investor to not only grow his/her investment with time but also improve and sharpen his/her investment strategies based on his/her experience with a specific type of real estate properties.

Related: What Are the Most Profitable Types of Real Estate Investments?

  • Mixed Type:

    While individual investors find it more efficient to invest in a single type of real estate properties, some individual investors and most institutional investors find it more profitable and efficient to invest in mixed types of properties. This means that some investors would have different types of investments that branch out to residential, commercial, and industrial real estate. This builds up investors’ portfolio and gives them more flexibility on their investment. This type of investment, however, requires a much higher level of experience and skills, as well as more efforts in management, which makes it far more appropriate for institutional type investors than for individual investors.

Different Types of Investors: Bottom Line

Whether you’re in it for the money or to simply reside, there are many different types of investors in the real estate market, and they all play a role in the changing dynamics of the real estate market. Falling under a certain category of the different types of investors does not mean you’re any less or any more of an investor than anyone else. No matter the size of your investment or the type of it, you should realize that your role in the market is just as important as the role of the biggest firm.

You now know which type of real estate investor you fall under? It’s time for you to make an investment, and we’re here to help. Mashvisor can provide you with the tools necessary to find the perfect property for your investment, as well as a rental property calculator that can give you accurate comparative and analytical data for your investment property in order to determine its efficiency and help you make the optimal investment decisions.

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Nasser Mansur

Nasser is an experienced content writer with a degree in English Language and Literature. He loves writing about all aspects of the real estate investing business with focus on market and property analysis and the best sources which every real estate investor needs in order to succeed.

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