Getting into real estate means you are either a real estate developer or a real estate investor. But what do they actually do? Does a real estate developer only construct houses? If so then, is it the real estate investor who finances the entire construction? It may seem confusing to many as they both deal with real estate, but understand that they are two completely different things. Both have a certain set of attributes and responsibilities that make them different from each other. But in order to know the differences between a real estate developer vs a real estate investor, we need to understand them properly.
Real Estate Developer
Put simply, a real estate developer is someone who buys land and builds a real estate property on it. Or, it could be someone who buys a real estate property that is in a very distressed condition and needs major renovations. But there are a lot of things that a real estate developer does other than constructing and renovating a house. They are responsible for financing, planning, designing, and bringing in a team of associates who are going to execute the plan. Meaning, from buying plain land to developing or renovating a building/project, the real estate developer’s job is to handle the project from the beginning to the end. After the construction, they sell the property in order to get a share of profit.
Real Estate Investor
Upon completion of the development of a real estate project, a developer sells the property to a real estate investor. But a real estate investor does other things including evaluating the market in order to choose the best property for generating money. In short, a real estate investor is someone who buys properties after analyzing and assessing the market and holds them for cash flow as an investment. However, a real estate investor usually does not finance a property’s development unless there is a contract between the developer and the investor. Such an agreement is called a Joint Venture Agreement (JVA), which is a partnership between builders, finance houses, and developers.
Differences between a real estate developer vs a real estate investor
- A real estate developer develops new real estate properties from the scratch with the intent of selling these properties for a profit. A real estate investor purchases the property and holds them for cash flow for investment.
- The process of becoming a real estate developer is straightforward and precise. Unlike becoming a real estate investor, to become a real estate developer you must have a professional certification or a college degree.
- A real estate developer is responsible for planning, designing, financing, selling, and bringing in a team of associates who are going to finish the project by executing the plan. A real estate investor, on the other hand, evaluates the market to find the best property for investment.
- The overall risk factor is greater for a real estate developer than a real estate investor because a developer has to put a lot of effort into the project including financing, developing, and managing.
- For real estate investors, there are different types of real estate investment schemes to get into the real estate business. But if you want to be a real estate developer, there are no other options other than becoming one.
- Real estate developers usually generate large amounts of return on investment but at a higher risk. For real estate investors, the amount of return always depends on the investment choices and preferences.
- Real estate development is a full-time job whereas, for a real estate investor, this could be done as a part-time job.
All in all, there are plenty of differences between a real estate developer vs a real estate investor. Although property developers can also become investors as well, they both have different roles and require a specific set of attributes including academic and industry knowledge, planning, connections, and so on.