What kind of a real estate investor are you?

Real estate investors serve as the pipe that gets a risky property into the mainstream market for consumption of the general masses while making a profit out of that risk.

In India, it is mainstream for a developer to offer residential and commercial real estate (sometimes even retail) spaces to a set of known investors to raise funds, start sales and gain confidence about the project being developed. As sales pick up and construction is in an advanced state, these early investors often resell their stock at a premium, sometimes through a tie up with the developing company itself.

But what kind of a real estate investor are you? How do you plan your real investments and what kind of returns do you look at? Here are the three types of real estate investors we reckon:

1) Traditional Investor - Interested in a long-term investment in property from which rental income can be generated. Typically expects modest value appreciation and instead is looking to generate regular positive cash flow.

2) Rapid appreciation dude - Plans to hold a property for a short period of time and to profit from rapid market movement. This class of investing became a cottage industry during the boom, died during the recession and now, is slowly making a revival.

3) Bank seized/ foreclosed/ auction dude - Seeks out distressed properties and plans to profit from a quick resale after doing some generally cosmetic improvements to the property. In fact, investors buying bank seized properties at an auction might need to make only modest improvements the property.

The returns, we have seen generally increase in the order in which the investor type definitions appear above. However, so does risk. Classify yourself. Find out what kind of an investor you are. Plan better.