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Investors are Back Despite Higher Acquisition Costs

Investors are Back Despite Higher Acquisition Costs

Last year investor purchases rose for the first time in four years despite soaring prices paid by investors to acquire properties for flipping or converting into single family rentals.

Investment-home sales in 2015 jumped 7.0 percent to an estimated 1.09 million from 1.02 million in 2014. The median investment-home sales price was $143,500, up 15.3 percent from $124,500 a year ago, according to NAR’s 2016 Investment and Vacation Home Buyers Survey.

“Despite a smaller share of distressed properties coming onto the market, investment purchases reversed course in 2015 after declining for four straight years,” says Yun. “Steadily increasing home prices and strong rental demand appear to be giving more individual investors assurance that purchasing real estate will diversify their portfolios and generate additional income if they decide to rent out the home.”

This year’s survey found that in addition to longer-term rentals, investors are most likely to attempt to and rent their properties for less than 30 days. Among investors, 42 percent did or tried to rent their property in 2015 and plan to rent their property in 2016. Twenty-four percent of vacation buyers did or tried to rent their property in 2015 and plan to rent their property this year. Vacation buyers are more likely to use a property manager or social media to rent their property, while investors are more likely to use a traditional real estate agency.

The typical investment-home buyer in 2015 had a median household income of $95,800 ($87,680 in 2014) and bought a detached single-family home (62 percent) that was a median distance of 22 miles from their primary residence (24 miles in 2014).

Investment buyers last year purchased property for a variety of reasons, with an increasing share from 2014 citing rental income as the primary reason (42 percent; 37 percent in 2014), followed by low prices and the buyer found a good deal (16 percent), and for potential price appreciation (14 percent).

Likely reflecting growing demand towards renting in the city, investment purchases in urban areas increased to 29 percent (26 percent in 2014). Purchased properties from investment buyers were more likely to be in the South (37 percent) and in a suburban area (41 percent).

Perhaps encouraged by rising housing demand and home prices, over 80 percent of both vacation buyers and investment buyers believe that now is a good time to purchase real estate.

NAR’s 2016 Investment and Vacation Home Buyers Survey, conducted in March 2016, surveyed a sample of households that had purchased any type of residential real estate during 2015. The survey sample was drawn from a representative panel of U.S. adults monitored and maintained by an established survey research firm. A total of 2,053 qualified adults responded to the survey. Respondents were sampled to meet age and income quotas representative of all home buyers drawn from the NAR 2015 Profile of Home Buyers and Sellers.

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