The Move Investor survey also shows investors are positioned to compete vigorously with traditional first-time homebuyers for hot deals. Two-thirds of investors (65.5%) said they expect the problems first-time buyers are having in getting mortgages will make it easier for them to compete for properties. One in five investors (18.5%) say they'll be cash-only buyers, a strategy that's out of reach for most first-time buyers. Eight out ten (80.5%) expect cash discounts from sellers.
Today's Investors, Not Stereotypical Deal Driven Experienced Flippers
Contrary to the tactics used by investors known as 'flippers,' 50 percent of today's real estate investors plan to hold their properties for five plus years. Only 11 percent expect to sell within 12 months of purchase. Two-thirds (67.5%) say they're investing for the long term.
Fifty-nine percent (59%) told Move they're new to real estate investing, with 33.5 percent considering their first investment purchase and 8.5 percent in the process of buying and selling their first investment property. Another 17 percent said they just completed their first transaction and plan to make more. Only 36.5 percent have experience in more than one property transaction.
When it comes to repairs and maintenance, 56.5 percent of investors say the repair and maintenance of investment property has not been difficult. Moving forward, 42 percent plan to invest their own time and energy to improve, repair and maintain their properties. The remainder said they'll hire a contractor for repairs (29.5%) or purchase move-in-ready properties (28%). The majority (65.7%), don't expect repair costs to exceed 20 percent of the property's purchase price.
"This data suggests today's climate is hot for investing and is attracting a lot of new people that don't fit the stereotypical deal-driven flippers that buy and sell properties quickly," said Move, Inc. Chief Executive Officer, Steve Berkowitz. "They're mostly entrepreneurial individuals that will make vital contributions to local communities by investing their own money and sweat equity to improve and maintain properties. These personal sacrifices made over the long run will help improve housing stocks, home values, property tax bases, and thousands of local communities."
Investors Combine Cash and Credit to Snap Up Properties
While cash is king in many circles, 75.5 percent plan to combine cash and credit to purchase properties as they build their real estate portfolio. In fact, 59.5 percent plan to put less than half down on their next property purchase and they'll finance the rest. Those planning to use more than 50 percent cash and finance the remainder, account for 16 percent of today's investors. Investors told Move the second most difficult challenge has been in finding financing (57%).
"The fact that most real estate investors plan on combing cash and credit for their purchases goes against the conventional wisdom that investor transactions today are mostly cash-only sales. We were surprised to learn that 75 percent of investors are financing portions of their purchases. This suggests they're seeing tremendous or once in a lifetime opportunities and may be tapping into credit or taking out second trusts on existing properties. The data also shows they're expecting high returns to match the level of investment they're making in an arena that is new to many investors," Berkowitz said.
High Risk Leads to High ROI Expectations
Based on the investments they're making in today's environment, real estate investors clearly expect high yield returns. Nearly half (48%) expect a profit of 20 percent or more from their property investments, a 4 percent annual rate of return over five years. Another 40 percent expect a profit of 10 percent, and only 6.5 percent expecting a 5 percent or less return on investment. Half (50%) of today's real estate investors plan to hold their properties for five plus years.
Property Investments May Become Gateway to Homeownership For Many
While the survey shows investors will outnumber traditional homebuyers three to one in the next two years, 27 percent said they'll buy a primary residence as a first-time buyer as their first real estate investment. Nearly half (49%) plan to live in their investment property until it's sold or turned into a rental property. Slightly more than half (56.5%) will put their investments to work as rental properties, and 28 percent plan to purchase vacation property that they'll eventually sell. The Move Investor survey also found 30 percent of real estate investors are interested in buying retirement property as an investment.
"The survey suggests some first-time buyers may be looking at investing as a strategy to becoming homeowners," Berkowitz said. "While today's market is tough for some, it's also motivating millions to take an unconventional approach and creatively search for new ways of entering the housing market. This data also suggests the dream of homeownership is alive for millions that are keeping their eye on the future and using their initial home as the first in a series of what may become many investments in real estate. Investment opportunities - perhaps next door or down the street - will continue to knock at the door for many local investors with the vision, faith and interest in their local markets."