Investors have turned more than 3 million former foreclosures into rentals, which made single-family rentals the fastest growing rental category.
According to NAR, 86 percent of today’s investment buyers report that now is a good time to purchase real estate.
Plus the five reasons now it the time for investors.
Who would you rather be? The average American homeowner who moves once every eight years or the average American homeowner/investor who moves every eight years, buys an investment property every two years and sells one every five years?
With the decline in foreclosures and the corresponding decline in investor purchases, many people have the impression that residential real estate investing is dying out or returning pre-boom levels. Nothing could be further from the truth.
Real estate investing is a big business. In the six years that have passed since the foreclosure floods first hit, investors have turned more than 3 million of them into rentals, which made single-family rentals the fastest growing rental category.
In the past six years, investors have turned more than 3 million of them into rentals.
Those who have been bitten by the investment bug are eager for more. According to NAR, the bulk of today’s investment buyers (86 percent) report that now is a good time to purchase real estate.
Newcomers are signing up every day, drawn by single-family rentals’ dual revenue stream that can produce returns exceeding 8 percent. Like all real estate, rentals generate capital gains from appreciation.
Investors who bought foreclosures are doing OK; they fixed them up and rented them out created capital gains that are hard to beat today, but investors who buy wisely in today’s hot markets are doing just fine.
The second revenue stream is cash flow from rental income, which sets single-family rentals apart from the vast majority of securities investments that most Americans are familiar with.
Rents are soaring and vacancy rates declining, which makes it easy for landlords to keep their properties rented and their rental income is outpacing inflation. Even moderate markets, millennials find single-family rentals to be the perfect steppingstone to homeownership, and they are creating extraordinary demand for rentals.
Rents are soaring and vacancy rates declining, which makes keeping properties rented easy.
For anyone who understands single-family rentals, these changes and others are creating new opportunities that didn’t exist at the peak of the foreclosure floods.
It’s a different way of looking at real estate, where capacity rates and operating costs are just as important as resale value. Here are five reasons why this is a great time to do business with investors:
1. Millions of small-time investors are looking for good agents…
Four years ago foreclosure auctions and pre-foreclosure sales — transactions that don’t create a commission — accounted for the lion’s share of deals in the hottest markets.
Those days are over. According to NAR Realtors Confidence Index June 2014, distress sales were only 8 percent of total sales in June.
Distress sales were only 8 percent of total sales in June.
Investors are hunting harder for properties, which make them a great market for buyers agents who know what constitutes a good investment property and for sell-side agents who know that investors aren’t so limited by geography.
Buyers might live 50 miles away — or across the nation.
2. Commissions are higher today…
With investors buying more REOs and properties listed in MLSs, the days of the 30 percent foreclosure discount are gone, and many investors pay close at full price.
The properties they buy cost less to put into rent-ready condition, which saves investors 10 to 20 percent of their purchase price but higher purchase prices mean larger commissions.
3. Fewer deals fail…
Sellers love dealing with investors because they pay all cash (though usually not their own cash — most investors have their own investors). Buyers who don’t need financing also don’t risk losing a deal to a low appraisal or a last minute problem with financing.
4. Agents stand out in the crowd…
Investors don’t hire agents because they’re referred by a relative. Relationships are all business, and they are looking for competence, brains and expertise.
Whether you are buying or selling to investors learn your local market from the perspective of an investor. Network with local real estate investment clubs and social media.
5. There’s been a change in perception…
Perhaps the most important reason it’s a great time to be working with investors is change in the way many people think about it today — people who just a few years ago would never have considered real estate investing.
“Many of my customers ask me how they can attempt to buy their next home, while holding on to the one they already have — a complete turnaround from the mentality of the seller of yesterday,” said Will Stein broker and owner of Belair Realty.
“Many mom-and-pop homeowners might not be savvy investors, but they call me all the time saying, they just want one rental property to help with long-term cash flow. It’s becoming the new 401k — and it’s smart.”
Many investors just want a rental property to help with long-term cash flow — it’s the new 401K.
It’s a completely different world out there. Investors have become anyone who can afford to buy a second home and put it on the rental market. And with soaring rents and a decline in vacancies — now is an excellent time to assist your clients in becoming investors.