The 9.2 Billion Impact of Real Estate Investors

REAL ESTATE INVESTMENT REALITIES: THE $9.2 BILLION IMPACT OF 28.1 MILLION Ü.S. REAL ESTATE INVESTORS America's Housing Crisis • Decimated Equity in American Homes Leading To 4 Million+ Foreclosures • With Inventories Rising & Prices Falling A Positive Force emerged: Residential Real Estate Investing • Large Numbers Of Individuals & Partnerships Were Formed To Buy Residential Real Estate • Foreclosures Began To Be Purchased, Renovated & Rented • Affordable Rental Homes Provided Options For Rental Who Lost Homes • Investment Sales Accounted for for nearly 1 out of Every 3 Home Sales in 2011 !? When Few Other Buyers Would Take The Risk Investors bought up foreclosures in local markets Restored buyer confidence and began the process of price stabilization Investor-owned homes have established single family rentals as a 100-billion dollar business Single family rentals have become so numerous that today they outnumber apartments Investors played a critical role in the stabilization of local real estate markets ravaged by foreclosures UNTIL NOW LITTLE WAS KNOWN ABOUT RESIDENTIAL REAL ESTATE INVESTORS • How many are there? • How many actively buy and sell properties continuously? • How many are more passive, managing one or two at a time? • How much do they spend to repair the housing stock damaged by foreclosures? • How are they financing their transactions and what restrictions limit their activity? American real estate investors 3% of Americans or 7 million people, consider themselves to be real estate investors and they will be actively buying property within the next 12 months 8% own investment property but have no current plans to buy more 89% of Americans are non-investors The number of residential real estate investors today is about the same as the number of Americans, who own Roth IRAS or the total number of moneymarket fund shareholders = 1 million 28.1 million 28.5 million 29 million Americans are real Americans own a Americans are estate investors Roth IRA money market fund shareholders More Than A Third Of Real Estate Investor profile Investors Plan To Buy More Real Estate In The Next 12 Months Most active investors are under 55 years old (76%) and are more likely to live in the South or West (66%) 5% 39% of active investors intend to increase their purchases More than a third (34%) of 39% I 26% plan to buy as many in the year to come, as they did in the past year 30% active investors make more than $75,000 a year Only 30% said they plan to buy fewer properties - 37% have a school 26% degree or less 5% were undecided These aggressive plans signal investor confidence that: • Rents will continue to be strong • Prices will continue to rise • Properties purchased today will appreciate Among investors who plan to buy more next year 54% 36% 55% 36% of investors planning to buy more properties next year earn over $100,000 a year 54% are between the 55% are college graduates ages 35 and 55 Rehabilitation Spending Investors plan to spend a median of $7,500 a piece to repair and rehabilitate their next purchases Investors Spend $9.2 Billion Renovating Real Estate $30.000 or more 16% $20,000-$30,000 20% $10,000-$20,000 12% $5.000-$10.000 18% $5,000 or less | 40% 25% 50% 75% 100% At a median expenditure of $7,500 per property, investors are spending a total of $9.2 billion per year for housing repairs = $1 billion = $0.1 billion About $4.6 billion has an impact on local labor markets Approximately 50% of the cost of a rehab goes LABOR And $4.6 billion has an impact on local suppliers to labor and 50% to materials MATERIALS Real estate investors are spending more than 4x as much as the Federal Neighborhood Stabilization Program How Investors Finance Purchases The impression that all real estate investors use all cash for their purchases is certainly not true 24% plan to pay all cash for their next purchase 12% acquire properties as exchanges under Section 1031 of the Internal Revenue Code 9% 24% 7% 4% use a self-directed retirement account 12% 51% put down a percentage of the purchase price and finance the balance 4% 44% 44% of all investors use finance, and put 20 to 50 down Only 7% put down more than 50% Other 9% 51% of real estate investors finance their purchase with down payments up to 50% Sources: http://www.biggerpockets.com/rei/residential-real-estate-investor-survey-biggerpockets-memphisinvest/ http://www.memphisinvest.com/biggerpockets-memphis-invest-real-estate-investor-survey/ Brought to you by: BiggerPockets Memphislnest www.memphisinvest.com www.biggerpockets.com