When you’re getting started in real estate investing, there are two ways to approach it: as an investor or as a landlord. There are also two ways to treat the properties you own: as a business or as a hobby.
Now, we’re not here to tell you that one is better than the other. Becoming a landlord and becoming an investor both have pros and cons. But when you approach owning property as an investor – and treat your property as a business – it’s going to be a very different experience that yields very different results.
Landlord Vs. Investor
So what exactly is the difference between a landlord and an investor?
A landlord is someone who typically owns a few properties near their home, and who manages the day-to-day operations of all their properties. They’re the people that tenants call when their toilet is clogged, or the garbage disposal stops working, or a neighbor is being too loud. Landlords spend a significant amount of time on site at their properties, dealing with tenant issues and putting out fires.
Landlords are typically handy, and can build and fix things on the fly. Landlords approach owning property as a hobby; they enjoy interacting with the tenant, fixing problems on each property, and managing the general upkeep. They are personally involved and invested in their properties, and because of the high amount of personal involvement they can usually only own a few properties at a time.
An investor is someone who owns multiple properties and acts as the CEO of their properties. They manage things on a “big picture” basis – they know the ins and outs of what’s going on with their properties, but they don’t deal directly with the tenants. They hire someone to manage the day-to-day operations at each of their properties so they can focus on growing their real estate portfolio.
Investors approach owning properties as a business. And, just like with any other business, they build the right teams and spend the majority of time focused on strategy and expansion.
And since investors aren’t bogged down in the day-to-day issues with each of their individual properties, they have the bandwidth to expand faster and wider than someone who approaches owning properties like a landlord.
What’s Right for You?
As we mentioned earlier in the article, there’s no right or wrong approach for owning and managing properties. What’s important to consider when determining how to get started in real estate is what’s right for YOU.
When you’re figuring out whether you want to approach owning property as a landlord or as an investor, there’s a few questions you’ll want to ask yourself:
How many properties do I own or want to own?
If you take the landlord approach, the amount of necessary hands-on involvement will limit the number of properties you can own, so that approach is only realistic for someone who’s looking to own one or two properties.
If you take the investor approach, you’ll have the bandwidth to purchase and support a larger number of properties.
How do I want to spend my time? How hands-on do I want to be?
As a landlord, you’ll be spending a lot of time dealing with your tenants and their issues. If something breaks, you’ll be expected to show up to fix it.
As an investor, you won’t get as much interaction with individual tenants; you’ll be dealing more with strategy, and how to grow and manage your portfolio.
Do I live (or want to live) near my properties?
As a landlord, you need to be close to your properties so you can get there at a moment’s notice. Investors hire property management companies to manage their properties, so they’re not limited by geography.
Is time on my side?
Renting properties is a time-consuming process. Between placing rental ads and actually showing the property, coordinating with potential tenants and dealing with no-shows, getting qualified renters into each unit can be a hassle.
While landlords handle the rental process themselves, investors hire management companies to handle the process for them.
How much money do I want to make?
While owning multiple properties can increase risk, it can also increase profit margins. Determining your ultimate financial goals – and how being a landlord or an investor aligns with those goals – is important to consider when determining how to get started in real estate investment.
After reviewing the facts, many people find themselves wondering, “Is being a landlord worth it? Do I want to spend all my time, energy, and resources managing these properties myself?”
If you find yourself asking that question, it means that the investor route – and hiring a property management company to manage your properties for you – is the better fit.
Think of property managements as landlords-for-hire. They’re the people who will be in the trenches for you, managing your tenants, keeping the building in working order, and running the day-to-day operations of your property – leaving you free to focus on managing and growing your real estate investing business.
While property management companies won’t handle EVERYTHING in your real estate investing business (you’ll still be responsible for financials, major renovations, and dealing with any property ownership issues that may arise), everything they DO handle makes them an invaluable resource.