, /PRNewswire/ — Real estate investors by three to one(1) will be more active in their local markets compared to typical homebuyers in the next 24 months, and 69 percent of investors say it’ll be easier to find properties in the near future(2), according to a new national survey of real estate investors released today by Move, Inc. (NASDAQ: MOVE), the leader in online real estate.
Compared to a year ago, 62 percent of investors are paying more attention to home values in their local markets. Twenty-three percent (23%) expect prices will fall in the next six to 12 months. The Move Investor survey also suggests local markets will be heating up with renewed investor interest and activity. Only 43.5 percent say it will be harder to find bargains and 41.5 percent expect it’ll be easier to sell their properties in the next six months. Meanwhile, 22 percent of investors are bullish and expect prices to rise in the next six to 12 months, and 53.5 percent expect prices to remain relatively the same.
Eight out ten (80.5%) expect cash discounts from sellers. 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. 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.
. Another 17 percent said they just completed their first transaction and plan to make more. 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. Only 36.5 percent have experience in more than one property transaction.
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%). 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.
We were surprised to learn that 75 percent of investors are financing portions of their purchases. “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. 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. 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.
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. Half (50%) of today’s real estate investors plan to hold their properties for five plus years. Another 40 percent expect a profit of 10 percent, and only 6.5 percent expecting a 5 percent or less return on investment. Based on the investments they’re making in today’s environment, real estate investors clearly expect high yield returns.
Nearly half (49%) plan to live in their investment property until it’s sold or turned into a rental property. 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. 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.
“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.”. “The survey suggests some first-time buyers may be looking at investing as a strategy to becoming homeowners,” Berkowitz said.
Each interview is assigned a single weight derived from the relationship between the actual proportion of the population with its specific combination of age, sex, education, race and geographic characteristics and the proportion in our sample that week. The survey was conducted by OmniTel, the weekly national RDD Probability Sample telephone omnibus service of GfK Custom Research North America. Tabular results show both weighted and unweighted bases for these demographic variables. Each Omnitel study consist of 1,000 completed interviews, made up of male and female adults (in approximately equal number), all 18 years of age and over. It is based on interviews conducted . The supplemental interviews utilized the same sampling frame as the national frame. The raw data are weighted by a custom designed computer program, which automatically develops a weighting factor for each respondent. Supplemental interviews were added to the national study in order to end up with a stable base size of 200 real estate investors. This procedure employs five variables: age, sex, education, race and geographic region. The margin of error on weighted data is +/- 3% and higher for subgroups.
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