From NMN:
While investors believe they will be able to outbid first-time buyers in the “rush” to snap up houses at today’s bargain-basement prices, a large majority apparently plan to use a combination of cash and credit to purchase properties as they build their inventories.
According to a new survey by Move Inc., which operates a number of key real estate-related web sites, three out of every four investors will finance at least part of their deals. And more than half will put up less than half the purchase price out of their own pockets.
That flies in the face of conventional wisdom that today’s investors are mostly cash buyers, said Steve Berkowitz, CEO of the Campbell, Calif.-based company, which runs Realtor.com, the official website of the National Association of Realtors, and Mortgagematch.com, a site which helps consumers find financing.
And it suggests, Berkowitz says, that investors are tapping into their credit sources, including taking out second trusts or home equity loans on properties they already own, to take advantage of what they see once-in-a-lifetime opportunities.
The survey also found that even though just one in five investors will be all-cash buyers, they believe the difficulties first-time buyers are experiencing in qualifying for financing will make it easier for them to compete for properties.
Another interesting finding: Today’s investors are not “flippers” who buy and sell right away. Instead, only 11% plan to hold for less than a year, whereas two-thirds say they are in their deals for the long-term. In addition, three out of five are new to real estate investment.
From the same Move Inc. report, but found at I-news:
Real estate investors are likely to be three times more active than other types of homebuyers in their local markets within the next two years, according to a nationwide survey from Realtor.com operator Move Inc.
Market research firm GfK Custom Research North America conducted the survey on behalf of Move from April 11-15, 2011. The survey included telephone interviews of 1,200 U.S. adults, of which about 200 were identified as real estate investors. Data was weighted by age, sex, education, race and geographic region.
A third of real estate investors are planning to buy in the next 24 months, compared to 8.6 percent of typical homebuyers — those planning to purchase a primary residence, vacation home or retirement property. Another 9.1 percent of typical homebuyers, and 28 percent of investors, plan to purchase between two and five years from now.
Some 56.5 percent of investors said the repair and maintenance of their property has not been difficult, and 42 percent plan to spend their own time and energy for that upkeep going forward.
Among the rest, 29.5 percent said they would hire a contractor for repairs and 28 percent said they would purchase move-in-ready properties. About 65.7 percent don’t expect repair costs to surpass 20 percent of the property’s purchase price, the survey said.
“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 who buy and sell properties quickly,” said Steve Berkowitz, Move CEO, in a statement.
“They’re mostly entrepreneurial individuals who 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.”
More than half of investors, 53.5 percent, expect home prices to remain the same in the next six to 12 months. Of the rest, 23 percent expect prices to fall. About 69 percent expect it would be easier to find properties in the next six months, though 43.5 percent expect it would be harder to find bargains.
Some 41.5 percent of investors expect it would be easier to sell their properties in the next six months, the survey said.
Only 18.5 percent of investors said they will engage in an all-cash purchase, while 75.5 percent plan to combine cash and credit to purchase a property. More than half (59.5 percent) plan to put down cash but finance more than half of the purchase.
Sixteen percent plan to put down more than 50 percent in cash and finance the rest. Of the cash-only buyers, eight out of 10 expect discounts from sellers.
About 65.5 percent of investor respondents expect the financing difficulties first-time buyers are having will make it easier for them to compete for properties, according to the survey.
“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,” Berkowitz said.
Interesting survey. Doesn’t really get into the “why” they are investing, but if I had to guess the number one motivation would be inflation expectations. Pretty much everybody out there expects rates to rise and inflation to increase eventually. That would make borrowing and investing in real estate a “no brainer” in today’s low yield environment. Will be interesting to see how it plays out.
I think investors are buying real estate because they don’t trust Wall Street.
Personally I’d rather pay a propery management company (that actually does something) than a portfolio manager.
I don’t think cash purchase and partial financing are contradictory. It is pretty common for an investor to purchase with cash to put the cleanest offer out, but then do an immediate refinance to keep a lot of cash on hand for the next property.