Real Estate Crowdfunding: What Are the Differences Between a Real Estate Developer and a Real Estate Investor?
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What is a developer?
Before we get into the heart of the matter, let's start by focusing on the basics so we can clearly identify the role of each player.
A real estate developer is a company that oversees and finances the construction of a building. It is also known as the project owner.
What are its responsibilities?
The real estate developer initiates the development project and is responsible for a number of tasks:
- project design;
- administrative matters, such as obtaining permits, typically with the assistance of engineering firms and architects;
- the search for financing and the acquisition of land;
- carrying out the work by engaging subcontractors and specialized contractors;
- and finally, the marketing of the project, for which the strategy may vary depending on the type of asset involved. The most common marketing approach is the off-plan sale (VEFA): Sale Before Completion. This allows the developer to be paid as construction progresses, according to a payment schedule that is established in advance and presented to the buyers.
How does the developer get paid?
When designing the project, the developer draws up a financing plan and a balance sheet for the project. The developer then outlines how the project will generate a profit upon sale. The developer may also include management fees in the financing plan.
Check out our explanatory video on what a real estate developer is
What is a real estate investor?
A real estate investor is a real estate professional who buys existing properties to resell them at a higher price. These properties can include various types of real estate assets: apartment buildings, houses, land, warehouses, retail spaces, or even office buildings.
A real estate dealer is liable for hidden defects in the properties they sell. They are also required to carry two types of insurance: construction defect insurance and general liability insurance.
What kinds of procedures does he perform?
The term “real estate investment transaction” is used in several contexts; it may refer to the purchase and subsequent resale of a property after renovation. It may also refer to the purchase of a property, its division, and its sale in separate units. It also encompasses projects involving the rehabilitation of a property that results in a change of use, such as converting office space into residential units.
Check out our explanatory video on what a real estate investor is