Investing in real estate can be an excellent way to generate passive income and build wealth. However, with the increasing number of rental owners identifying as intentional investors, the market has shifted, and it’s essential to plan ahead before investing in real estate. In this blog post, we’ll discuss the typical paths to real estate investment, different types of small-portfolio investors, common struggles investors face, and how property managers can help.

According to The Property Manager’s Guide to Attracting and Retaining Small-Portfolio Investors, a report published by Buildium and Propertyware, 52% of rental owners now identify as intentional investors, an increase of eight percentage points since 2018. Accelerated by the pandemic, the market has shifted from accidental landlords or those who hold onto a property for personal reasons, to those who are looking for income from the start.

There are three typical ways people enter the real estate realm. While the majority buy properties to rent as intentional investors, many stumble into real estate investing and become overwhelmed quickly. Which type of real estate investor are you?

• Intentional Investor: Intentional investors make up 52% of real estate investors. They buy properties with the express intention to rent them out for profit. This type of investor is likely to own multiple rental properties, have rental properties that are consistently profitable, have plans to acquire new properties over the next two years, and identify as a full-time landlord or real estate investor.
• Unintentional Investor: The unintentional investor makes up nearly one-quarter (24%) of all real estate investors. This type of investor has stumbled into a profitable real estate situation either by necessity or as a hobby. The unintentional investor is likely to own single-family rentals, utilize their rental as passive income, have a full-time job that’s unrelated to their rental properties, and see residential rentals as an intelligent investment in 2022.
• Accidental Landlord: The final category of real estate investor is the accidental landlord, coming in at 24% of all investors. This type of investor has become a landlord completely by accident. They are likely to own only one property, rent out a property they purchased originally to live in as a primary residence, inherit property unexpectedly, have no plans to expand their portfolio, and feel overwhelmed.

Across the board, whether intentional, unintentional, or accidental, small-portfolio investors tend to fall into one of four categories. These include DIY landlords, growth-focused investors, distance investors, and profit-conscious investors.

However, being a real estate investor is not always smooth sailing. The top five struggles of real estate investors, as reported by Buildium in their 2022 Small-Portfolio Investor Report, include maintenance and repairs, accounting, bookkeeping, and taxes, finding and working with a property manager, renovations, and legal issues.

Partnering with a professional property management company can be invaluable to all types of real estate investors. Property managers save investors money through their ability to negotiate better contracts with various professionals. They can also offer legal advice, have better technology, access to better quality contractors, act as a local expert for distance investors, and provide freedom from worry.

In conclusion, investing in real estate can be an excellent way to generate passive income and build wealth. However, it’s crucial to plan ahead and educate yourself on the basics of real estate investing and the challenges you may face in the process. Different types of small-portfolio investors face unique struggles, and partnering with a professional property management company can help alleviate stress and ensure your investment is successful.