What is the Difference Between a Borrower and a Real Estate Investor?
The real estate world can be complicated. There are a significant amount of terms and concepts that you need to understand to be successful in the field. Real Estate Investors, borrowers, and entrepreneurs are some of the most fundamental terms you’ll need to know.
Luckily, these are very self-explanatory and easy to understand. Here is what each term means and the differences as well as similarities between them.
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What is a Borrower?
A borrower is generally a person who is looking to obtain funding for an investment property. Although prospective borrowers are individuals, once they are approved for financing, their funding is sent to their LLC or company that has been set up for the purchase.
In the context of hard money and private money lending, the funding provided is used to finance a real estate venture. In the world of private lending when funding a real estate investment, there are borrowers and lenders.
Real Estate Investors are people who purchase properties as investments to provide them with passive income. Real Estate Entrepreneurs are those who receive the majority, if not all, of their monthly income through real estate investing.
Once a real estate investor or entrepreneur has sought out financing for a property purchase, they become a borrower.
What are Real Estate Investors and Entrepreneurs?
Both real estate investors and entrepreneurs are individuals who invest in real estate to generate income or benefits. There are many similarities between the two, but they’re defined by a few key differences.
Real estate entrepreneurs were once investors, who have transitioned from solely investing in a few properties to creating a business acquiring multiple properties as their main source of income. Their business model as an entrepreneur is based upon the act of investing in real estate full-time.
Aside from having the technical ability to spot lucrative real estate opportunities, entrepreneurs hold the critical ability to seize them at the right time. Driven to succeed just as much as the entrepreneur, investors tend to have less experience, are just starting out in the real estate world, or don’t put in as much time into their investment ventures. As a result, they are more concerned with smaller details and the daily functioning of their company or portfolios.
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When just starting out, it makes sense for any real estate investor to be preoccupied with the individual aspects of their property to make sure they stay afloat. However, as the investor grows, entrepreneurship and its tenets become more and more plausible. Any investor can become an entrepreneur, but not every investor does.
Real Estate Education
Being knowledgeable about the real estate market is critical in becoming a successful real estate entrepreneur or investor. That much is obvious. With more knowledge or experience in the field, entrepreneurs are able to lower risks, better investments, and build stronger relationships with lenders.
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