Investing Versus Trading

INVESTOR = mostly passive + dividends + long term capital gains

TRADER = mostly active + short term capital gains

As a Hassle-Free Cash Flow Investor, you must clearly understand the difference between an investor and a trader.  This is an important distinction in your investment style / investment philosophy.   Many people call themselves real estate investors when they are really traders.  While you can make a lot of money as a real estate trader, it is not the same thing as being an investor.

Hassle-Free Cash Flow Definition of INVESTOR:  An investor converts a lump of cash into an asset that has the probability of paying an income stream over a long period of time.   An investor is primarily concerned with cash flow and security of his principal over a long period of time.   To an investor, the increase in the equity value of an asset is a secondary benefit.  An investor is generally passive and expects his money to earn more money without the contribution of a lot of personal time and skill.

Hassle-Free Cash Flow Definition of TRADER:  A trader converts a lump of cash into an asset that has the probability of being resold for a larger amount of cash in the future.  A trader is primarily concerned about velocity and security of his principal usually over a shorter period of time.  A trader must buy and sell quickly or carrying costs and time will quickly erode his annualized return.  A trader is generally active and expects to contribute substantial amounts of management time and skill, as well as money.  A trader makes money ONLY if the value of his asset increases in value.

Being a trader is a job.  If you are like most people, you already have a job and don’t want a second one. Being a trader is NOT Hassle-Free.  As an investor, your money works so you don’t have to!  A good investor enjoys freedom of time and money.  Begin with the end in mind.   Focus on making good investments that will take care of you in the future while not eroding your quality of life in the present.

People looking to make money in real estate often call themselves investors, but their idea of investing is negotiating short sales, going to foreclosure auctions, scouring the world finding a needle in the hay stack deals, or doing rehabs and “flips”.  All of these are active forms of real estate trading that involve controlling a distressed property, improving its value, and reselling the property for a short term profit.   Admittedly there is a lot of money to be made being a real estate trader, but it is a JOB.  I have done over forty real estate flips in my life and I have made a lot of money doing them.  But doing flips is VERY hard and VERY time consuming.  It took me five years of study and practice before I successfully completed my first flip.   If the trader doesn’t show up to work, nothing happens.   Unless you want to quit your day job and become a full time real estate professional, stay away from being a real estate trader and focus on being a real estate investor.   A Hassle-Free Cash Flow investor should never have to do anything but monitor his cash flow and management team.

It is possible to build a real estate investment portfolio that takes less than one hour per month to manage.  With the right deal structure, leverage (financing), and cash flow it is very possible to achieve investment results well over 100% per year as a semi-passive investor.  If you can double your money every year as an investor working less than one hour a month, why take on the worries and time hassle of being an active trader?

TAKE AWAYS:  Being an active real estate trader takes time, skill and tenacity; it is a job.  However, being an investor in Hassle-Free Cash Flow real estate can be semi-passive, simple, and highly profitable.  The goal of Hassle-Free Cash Flow Investing is to enjoy your quality of life now, while creating financial abundance for the future.