Despite rising prices and shrinking foreclosure inventories, 65 percent of active real estate investors plan to buy as many or more residential properties in the next 12 months as they did in the past year, according to a new joint BiggerPockets.com/Memphis Invest national survey conducted by ORC International for BiggerPockets.com, the nation’s largest and most active real estate investing social network, and Memphis Invest, one of the nation’s leading providers of single-family rental real estate investment services.
The survey found that 39 percent of active investors intend to increase their purchases over the next twelve months while 26 percent plan to buy as many in the year to come as they did in the past year. The 65 percent of investors who plan to buy the same amount or more in the next twelve months than they did in the past represents 4.5 million investors. Only 30 percent said they plan to buy fewer properties than they have in the past. Last year investors purchased 1.23 million homes, a 64.5 percent increase over 749,000 in 2010, according to the National Association of Realtors.
Some 3 percent of American adults, or 7 million people, consider themselves to be real estate investors An additional 9 percent of all Americans own investment property today but have no current plans to buy more. Thus, one out of eight, or 28.1 million Americans, either consider themselves to be residential real estate investors or own residential investment properties today, according the survey .
“Though housing markets are changing across the nation, investors are still seeing great opportunities. Hundreds of thousands of foreclosures and short sales are coming to market and rents are continuing to improve in most markets, creating a positive environment for the nation’s 28.1 million residential real estate investors. They will certainly continue to be major players in the nation’s housing economy for the foreseeable future,” said Joshua Dorkin, founder and CEO of BiggerPockets.com. “We’re talking about a group of Americans that is about the same in number as the number of Americans who own Roth IRAs (28.5 million) or the total number of money market fund shareholders (29 million). They have significant buying power.”
The survey also found that real estate investors are spending more than four times as much as the federal Neighborhood Stabilization Program to repair and rehabilitate the nation’s housing stock. At a median expenditure of $7500 per property, investors are spending a total of $9.2 billion per year to repair the damage caused by foreclosures and rehabilitate the nation’s housing stock. By comparison, over the past four years Congress has authorized a total of about $7 billion for the Neighborhood Stabilization Program, the government’s primary response to repair housing damaged by foreclosure. Twenty percent will spend $10,000 to $30,000 on their next property and 16 percent plan to spend more than $30,000.
“This survey puts some hard numbers behind the contribution that investors are making towards not only improving neighborhoods and fighting blight, but also the towards driving the economy. Investors are purchasing homes that in some cases sit for months and add a drag on local home prices. This survey shows that those investors are driving their local economies by spending billions in repair costs with local electricians, plumbers, flooring companies and laborers just to name a few. Those dollars provide jobs and put money into local economies with local companies. It’s clear that investors are the ones who have risking their own money to improve and stabilize neighborhoods for new owners or tenants,” said Chris Clothier, a partner with Memphis Invest.
The survey found that lower interest rates and the removal of limits on access to financing would provide incentives for investors to be even more active in the nation’s housing markets. Lower interest rates topped the list of incentives that would make active investors more willing to invest in additional properties (70 percent). A distant second was additional tax incentives for capital spent to purchase, rehab or renovate investment properties (54 percent). Third place went to elimination of limits imposed by lenders on the amount they will lend an investor (46 percent) and fourth to easing of rules on section 1031 Exchanges (44 percent). Only 30 percent said that the easing of securities laws limiting the pooling of capital by investors for purchases would encourage them to buy more.
Access to financing is a critical issue for most investors, however most lenders put limits on the amount they will lend an investor, regardless of credit history, property values or track record. Nearly half, 44 percent, would be willing to put down more than 20 to 50 percent on a business loan in order to be able to borrow more from a lender, without limits.
The study was conducted using ORC International’s CARAVAN Omnibus survey using both landline and mobile telephones on August 9-12/16-19/23-26, 2012 among 3036 adults , 1,515 men and 1,521 women 18 years of age and older, living in the continental United States. Some 2,285 interviews were from the landline sample and 751 interviews from the cell phone sample. The margin of error for the survey is +/-03%. All CARAVAN® interviews are conducted using ORC International’s (ORC) computer assisted telephone interviewing (CATI) system.