We constantly ask our kids what they want to be when they grow up, and the answers can be pretty amazing. But as adults, we don't often stop and think seriously about our dreams and goals.
I often ask people this sort of question, and given what I do, it's probably not surprising to find that the two most common answers I hear are "property developer" and "property investor".
And although you might think the two are interchangeable, it might surprise you even more to discover that they're actually quite different. Let's take a look at the 5 main ways they differ.
1. Their Goals
A property investor's goal is to generate some form of income from the property they buy. This can take two forms:
The holy grail of property investing is to get both from the one property. Some property investors also choose the option of investing in a developer's deals as a money partner.
A property developer's goal is to add value to a property in order to make a profit. This usually involves turning that one property into multiple lots or properties, which could include land, townhouses or apartments.
Essentially, they’re creating new property at a wholesale price. Although someone might luck out and make a profit without really knowing what they’re doing, reality is that the more skills you develop in order to improve your property development skills, the better the returns you’re going to get.
2. Their Approach
For a property investor, their approach is to buy the very best deal they can find that matches their strategy. For yield, they're going to look for low purchase price, high rental yield properties that generate a positive return. For capital growth, then it's a case of finding areas showing strong potential that are likely to have a strong uplift in price. Both strategies are to some extent passive - once a property is purchased, the investor doesn't have a lot of say over how rents or prices will move from that point forward - it's up to the market.
A property developer, on the other hand, is very active in influencing the outcome of a deal. They determine where to buy, how they can develop a property for the highest and best outcome based on supply and demand in the area, influence what is built there if that's their strategy, and a lot more. Sure, they will have a circle of trusted advisors to help them achieve their goals, but they need to be more active in making sure that happens.
I often ask people this sort of question, and given what I do, it's probably not surprising to find that the two most common answers I hear are "property developer" and "property investor".
And although you might think the two are interchangeable, it might surprise you even more to discover that they're actually quite different. Let's take a look at the 5 main ways they differ.
1. Their Goals
A property investor's goal is to generate some form of income from the property they buy. This can take two forms:
- Cashflow - this involves receiving a positive cashflow return from the property in the form of rent, and over time those rents should rise
- Capital Growth - capital growth occurs when the price of the property rises. An investor may hold a negatively geared property for a number of years, even though it’s costing them money, because they believe the growth in value will be bigger than the loss made along the way
The holy grail of property investing is to get both from the one property. Some property investors also choose the option of investing in a developer's deals as a money partner.
A property developer's goal is to add value to a property in order to make a profit. This usually involves turning that one property into multiple lots or properties, which could include land, townhouses or apartments.
Essentially, they’re creating new property at a wholesale price. Although someone might luck out and make a profit without really knowing what they’re doing, reality is that the more skills you develop in order to improve your property development skills, the better the returns you’re going to get.
2. Their Approach
For a property investor, their approach is to buy the very best deal they can find that matches their strategy. For yield, they're going to look for low purchase price, high rental yield properties that generate a positive return. For capital growth, then it's a case of finding areas showing strong potential that are likely to have a strong uplift in price. Both strategies are to some extent passive - once a property is purchased, the investor doesn't have a lot of say over how rents or prices will move from that point forward - it's up to the market.
A property developer, on the other hand, is very active in influencing the outcome of a deal. They determine where to buy, how they can develop a property for the highest and best outcome based on supply and demand in the area, influence what is built there if that's their strategy, and a lot more. Sure, they will have a circle of trusted advisors to help them achieve their goals, but they need to be more active in making sure that happens.
