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Investors, Speculators, and Normal Buyers

By: Peter Mulholland & Ora Ross

Investors, Speculators, and Normal Buyers

Tags: Home Buying, Investing in Real Estate

This is how investors, speculators, and normal buyers differ.

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There are three types of buyers we commonly see in today’s real estate market: investors, speculators, and normal buyers looking for their forever homes.

That said, I’m noticing that some people are getting a bit confused. Normal buyers are starting to think like speculators, speculators are starting to think like investors, investors are starting to think like normal buyers, etc. To help know which type of buyer you are and help clarify your future home-buying decision, I’ll categorize each term:

1. Investors. Investors are all about the numbers. They aren’t always worried about what a home will be worth in 10 years. What they want to know is this: Can they put in as little of their own money as possible, and will the property carry? In other words, will the tenants pay for the debt load? Investors understand that every time a tenant makes a rent payment, it pays principal on the unit. Even if the investment doesn’t go up in value, the tenant is paying equity, and at some point, they’ll own the whole property. Or, they can refinance against the property and use those funds to buy their next property. I could do a whole separate video on real estate investors, but the point is, investors need to know that the numbers make sense.

2. Speculators. Speculators buy properties where the numbers often don’t make sense. The rents don’t cover the loan. However, they’re speculating that the value of the property will go up in a short period so they can sell and make their profit. Some speculators buy real estate so they can redevelop it, resell it, and make a profit.
 

"Homes can become incredible investments that allow people to retire or change their lifestyles later on in life."

3. Normal buyers. These buyers are looking for homes to live in and raise their children. They’re all about bedrooms, space, gardens, neighbours, location, etc. If you’re this type of buyer, ask yourself: Where do you want to be in the next five, 10, or 25 years? Where do you want to raise your family? Which driveway will make you happy when you pull in at the end of the day? This isn’t to say that normal buyers don’t care about getting good value for their money, but they’re not worried about the flip. They’re not worried about what a home will be worth next year unless they plan on selling it next year.

Here’s the amazing thing: In my 30 years selling real estate in the Toronto area, I don’t know anyone who’s ever regretted buying a family home after many years have passed. We’ve all seen what a market can do in that amount of time, so homes can become incredible investments that allow people to retire or change their lifestyles later on in life.

If you’d like to talk more about which buyer you are or have any real estate questions at all, don’t hesitate to reach out to any of us at the Mulholland Ross Group. We'd love to hear from you.