What is a real estate investor?

[Don Konipol]

Or, more specifically WHO is a real estate investor?

As the term is now used, a wide variety of activities, some having almost nothing to do with investing, many having only a passive association with real property are described by this term.

It may be beneficial to look at the history of the term real estate investor.  When I was a kid in the 1950s and 1960s, the label "real estate investor" was used to describe the occupation of people like Harry Helmsley, the Rockefeller family, Fred Trump, and Bill Zeckendorf.  These people bought commercial real estate, sold it, brokered it, syndicated it, accumulated it on a grand scale, built skyscrapers, developed retail centers.  The guy down the block who owned a duplex and rented the other half wasn't a "real estate investor", he was whatever he did as a full time job, plus a guy who owned a duplex because he couldn't afford a single family.

There were people who owned property on a scale much smaller than the Helmsleys, Trumps and Rockefellers.  They usually owned mid size apartment buildings.  We called them landlords.

In 1959 Bill Nickerson, a California Telephone Company employee, wrote and had published a book titled " How I Turned $3,000 into $1,000,000 By Investing In Real Estate In My Spare Time".  This was the very first book that described a path for the average small investor to, in Bill 's own words "pyramid" a small single family "fixer upper" into a mini real estate empire.  The underlying theme was purchase a property being mismanaged, in need of repairs (chiefly cosmetic), fix the deficiencies (managerial and physical), raise the rents, and monetize your profit by trading up to larger property where you can do the same.  And a few investors followed Nickerson's advice and some did well.  And then 1970s inflation hit, especially housing prices in California.  And a brand new industry was born.

Until the late 1970s, Nickerson's book, published in NINE editions and revisions, was the only book geared to the small investor wishing to have a direct investment in real estate.

By the late 1970s many people, some just owning a single family home, had ridden the housing price explosion in California real estate, and thought why not do this with more than just their personal residence.  Al Lowery wrote a book similar to Nickerson,'s, and that partnered with him giving seminars, selling "books and tapes" and starting real estate investment clubs in many cities. Robert Allen (Nothing Down) and a host of other less qualified and more ethically challenged individuals followed suit.  The fix and flip as well as the wholesaling industry was born.

My point is that we now accept the labeling of everything remotely connected to real property as real estate investing, and those involved in these activities as real estate investors. Labels, titles, descriptions, etc are used to distinguish one group from another. I don't believe that the new guy trying to get a SFR under contract and sell the contract to a wholesale buyer for $2000, and Donald Trump being labeled both as "real estate investors" provides anything meaningful for this term.

"I can't define it, but I know it when I see it" is a famous quote from a Supreme Court Justice.  I say the same about the term real estate investor.  A precise definition is not possible.  But if we think of some real estate activities as being in the real estate BUSINESS and others as in real estate INVESTMENT, we can more precisely utilize the term.

Someone who brings two parties of a transaction together is in a business, not an investor.  So brokers, agents, wholesalers, finders, bird dogs, etc are not real estate investors, they are in the real estate business.  Same of course for any of the supporting personnel, like title companies, mortgage brokers etc.

What about the financial advisor that invests his clients money in real estate deals.  OK, let's say he is not an investor. What about if invests his own money along side his clients?  Is he both an investor AND in the real estate business?

What about the guy who buys a property, fixes it up and sells it? Investment? Business? Or both?

What are your thoughts, what criteria do you use or think should be used to define a real estate investor?  Or do you think it matters at all?