For many, the pandemic has opened their eyes to just how vulnerable they may be. Many people are looking for a career change or a second source of income. Often the search for new income leads to real estate. The question for many is whether to become a real estate developer or a real estate investor. Which one should I choose?
It is not up to anyone but you to choose the right career for you, but in order to make that decision, you will need to first know the difference between the two.
We will lay out the major differences between being a real estate developer and being a real estate investor with regards to the experience or level of education required for each career path, the pros and cons of each, the cash flow that is to be expected of each career, and the time required for each career choice to succeed.
The difference between a real estate developer and a real estate investor:
A real estate developer is, generally, someone who develops new real estate properties from the ground up with the intent of selling these properties for a profit.
As for a real estate investor, this is someone who invests a certain amount of money in buying an investment property/properties with the purpose of either renting them out or for the purpose of selling them outright after renovating it or upgrading them.
Investment properties are mostly single-family homes, multi-unit apartments, or repurposing units to condos
The level of education or experience required to enter each field of career:
When it comes to the level of education or experience required, to be a real estate developer will require a high level of education, an associated degree, and around 5 years of experience, as suggested by most industry experts. In addition, becoming a real estate developer requires extensive knowledge of both the real estate markets you operate in as well as national trends.
Real estate developers, require you to have sufficient knowledge in several different fields, including law, business administration, construction management, civil engineering, urban development, and the different processes required in order to develop new real estate properties from the ground up.
As for a real estate investor, many of those requirements can be bypassed. Not because a real estate investor does not require an extensive amount of knowledge, but because this knowledge can be self-learned. Moreover, the risk associated with real estate investing mistakes is far less than that associated with real estate development.
What amount of income is to be expected from a career in real estate development vs. real estate investing?
As a real estate developer, you can expect large amounts of return on your investment, but at a higher risk. The amount invested in developing a new real estate property is far greater than the amount needed to invest in an already existent one, due to the costs of construction from the ground up, in addition to other legal fees, contractors, etc. However, once your real estate property is sold, the return on investment is usually very high.
As for a real estate investor, the amount of money that you make will always depend on your investment choices and preferences. As an investor, you will have the option to make smaller amounts of income at a lower risk. In addition, you are able to start an investment with a smaller amount of money than the amount associated with real estate development.
The management and time requirements associated with each career choice:
A career as a real estate developer will require you to work full time, period! This is not something you can do as a side-hustle. You always need to be ahead of your investment, planning your next move and making sure you finish developing your real estate property as fast as you can at the lowest cost in order to generate the largest amount of income.
You need to invest a lot of time into building relationships and learning new things about the real estate markets that you’re competing in.
As for a real estate investor, this could be done part-time. You get to decide on the amount of time that you’re willing to put in your investment, and whether you’re going to manage your investment property personally or by hiring a professional property management company. You still need to be personable and social in the industry as well as up to date on all the ongoing real estate trends and factors affecting the local housing markets you operate in. The more time you invest the more rental income you can expect it to generate.
A career as a real estate developer will mean that you are always thriving to expand your knowledge and experience through higher education, degrees, internships, and every other means available in order to build your empire. That is the nature of a career as a real estate developer due to the high-risk, high-reward of it. As for a career as a real estate Investor, you will have more freedom to decide on the amount of time, effort, and money that you’re willing to invest in your career, which will proportionally decide the amount of risk associated with your investment.
Lastly, whether you decide on a career as a real estate developer or as a real estate investor, data, experience, and market analysis are needed to make your real estate investment decisions. Being able to pin-point the exact types of real estate properties that you are looking to invest in, in whichever neighborhood, and at whichever price are the things that will make the difference in levels of success.