Who is an Investor ?
An individual who commits money to investment products with the expectation of financial return. Generally, the primary concern of an investor is to minimize risk while maximizing return, as opposed to a speculator, who is willing to accept a higher level of risk in the hopes of collecting higher-than-average profits.
An investor is concerned with maximizing the return on his equity.
Who is a Lender ?
A private, public or institutional entity which makes funds available to others to borrow.A lender approaches a loan as an “investment,” as well. In fact, in the loan business we often call our lenders “investors.” The property that the investor views as a growing asset the conventional lender views solely as security for the loan.
As a mortgage broker, I have the pleasure of seeing quite a number of potential loan transactions.
It’s because there is a very basic difference in philosophy between lender and investor.
An investor is concerned with maximizing the return on his equity.
Whether through leverage, adding value by making improvements, or adding value through improving a property’s cash flow, the goal is to make as much money on the equity investment as possible.
The return he receives is commensurate with the risk he takes with his equity investmentA lender is concerned with something entirely different:
Getting paid back! A lender approaches a loan as an “investment,” as well.
In fact, in the loan business we often call our lenders “investors.” But these investors approach their investment from the standpoint of managing their risk in return for an acceptable rate of return:
The note rate on the loan.
The property that the investor views as a growing asset the conventional lender views solely as security for the loan.