When people hear about real estate, they generally think of a real estate agent. That doesn’t always spark a huge amount of trust, considering that they’re apparently voted as one of the most untrustworthy professions. But there’s another side to real estate that many people aren’t aware of, namely the real estate investors.
Many people will use agents and investors interchangeably, and sometimes they’ll even get confused on what an investor does. A real estate investor, as the name suggestions, can be someone that simply invests money in residential or commercial properties, often owning land or a building that is rented to a tenant, but that’s not always the case. An investor can also be someone who purchases a property with the intention of increasing its value with renovations then selling it for a profit. In other cases, a real estate investor can also be a label for someone who’s doing a wholesale deal. That usually works by finding someone who is interested in selling their home, putting them under contract, and then pairing that property up with someone who is interested in purchasing the home. The wholesaler essentially becomes the middle man or connector in such deals.
So, how do we break down the differences between an agent and an investor?
A real estate agent generally works under a broker and will act as the liaison for sales or purchases of property by using the local MLS and showing properties to potential buyers. They earn their income by getting a commission off of a successful sale or purchase of the property. The agent is simply licensed to operate within this context of representing a seller or buyer.
A real estate investor is interested in purchasing the property for their own investment, and they usually bypass agents. In many cases, they will talk to homeowners who are looking to relocate more quickly or are going through some sort of situation that requires them to get cash for their home in a rushed manner. This is an important point because real estate investors will offer lower values than what a homeowner would normally get going through the traditional sales process via an MLS listing. This is because investors are looking to purchase properties for about 70% of their potential value in order to turn a profit after rehab costs. The plus side to this is that they can purchase and close on a house in days without requiring you to make modifications or improvements to the house or making you go through the normal closing process and associated fees. This is a very common practice in many cities, especially in bigger ones. It’s so common that people are often searching terms such as “we buy ugly houses Houston” specifically looking for an investor who would be willing to pay cash for a dilapidated property.
For a quick view at the differences between real estate agents and real estate investors, check out this infographic from Sell My House Easy Fast: