Funnily enough, although a lot of investors are in the market for the same reasons, the routes they take to get there are often quite different.
Some investors might be hungry for rental returns, whereas others might be looking to flip a quick buck with a DIY project. The majority, however, fall into one of 5 key categories.
The different types of real estate investor
Different approaches and market tactics often put investors in one of the following camps:
1) The mining town investor
Although they might not necessarily be investing specifically in mining towns, investors with a ‘get rich quick’ mentality are typically mining town investors.
By jumping on any latest scheme or market trend, these investors are the ones that are likely to be less averse to taking on high amounts of risk in order to drive the returns they want to see.
A small percentage will achieve the success they’re after, but the vast majority will have their first investment property as their last, as they watch the ‘hot’ market they’ve put their money in fall at an alarming rate.
2) The accidental investor
The Australian Tax Office will deem them to be investors, but that isn’t likely a term they’d use to describe themselves. Often characterised by only having one investment property, these are the investors who have wound their way into the market almost accidentally.
The majority of homeowners will sell their property when the time comes to move, but this group stretch themselves and retain both. Whether they’re waiting for the capital growth to be significant enough for them to sell, or they’re just holding onto it for sentimental value, they’re still deemed as a property investor.
3) The DIY fanatic investor
This is the group of people that’s confident enough in their own abilities to take on the mammoth task that is completely refurbishing a property. Although they might be using the right clichés, such as ‘cosmetic renovation’ and ‘good bones’, it’s a rarity that they’ll actually manage to drive a property to profit.
The DIY investor often won’t stop at the bricks and mortar of the property – they’ll try to handle other areas of the investment process themselves, often taking on the role of buyer’s agent and property manager themselves. It’s an awful lot of work and unsurprisingly, it doesn’t regularly pay-off.
4) The young hot-shot
Often picked on online and singled-out in real estate investment articles, these are the 20-something high-rollers who’ve pulled together enough cash to buy an investment property.
These investors will often have portfolios of over 3 properties, but as they’re capital-poor, they’re usually highly leveraged. They’ll be buying the incredibly affordable properties in ‘up-and-coming’ gentrifying areas of cities.
5) The sofa investor
These investors aren’t lazy by any extent, but the ease with which they seem to drive capital returns leaves many assuming that the real estate market is a simple one to make money from.
Although they’re usually high-earning professionals in white-collar jobs, they’ll be tight with their budgets and hesitant to spend. They will, however, have money to spend on expert advice, as well as outsourcing the management of their portfolio.
Sofa investors usually stand above the rest in every asset class, reaping the benefits of having the money to spend on high-end professionals to assist them with the investment process.
They’ll usually be buying blue-chip properties and sitting on them for the capital growth.