-
THE IMPACTOF INVESTORS ON CASHOUSING MARKET
Presented by
Carmen Hirciag, MBA
Senior Research Analyst
-
Survey Methodology
379 online surveys conducted in February-March 2015
Respondents: REALTORS who have worked with investors inpast 12
months (February/March 2014 February/March 2015)
-
REALTORS GENERALINVESTOR BUSINESSInvestor Market Overview
-
More REALTOR Respondents HaveWorkedWithInvestor Buyers During
the PastYear
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
50%
2013 2014 2015
41%
34%
47%
-
Number ofTransactions Declining
Q: How many investor transactions did you close in the past 12
months?
0
1
2
3
4
5
6
7
2013 2014 2015
6.4
4.9
4.0
# ofTransactions
Average Investor Transactions
-
InvestorsAccount for 26% of Business
0.0
2.0
4.0
6.0
8.0
10.0
12.0
14.0
16.0
15.2
4.0
Nu
mb
er
ofT
ran
sact
ion
s
Average
Total Closed Transactions
Investor Transactions
Q: How many transactions did you close in the past 12
months?
Q: How many investor transactions did you close in the past 12
months?
-
Investor Business Declining
39%
32%
26%
0%
5%
10%
15%
20%
25%
30%
35%
40%
45%
2013 2014 2015
Q: How many investor transactions did you close in the past 12
months?Q: How many total transactions did you close in the past 12
months?
-
Number of InvestorClients Stable
Q: How many investor clients do you currently have?
0
1
2
3
4
5
6
7
2013 2014 2015
7
5.2 5.4
#
o
f
C
l
i
e
n
t
s
Average
-
1/3 REALTORS Have BeenContacted by PreviousClients Ready to
Sell
Yes 34%
No 66%
Q: Have you been contacted by any previous investment buyers who
will be ready to sell in the near future?
-
LAST INVESTOR BUYERTRANSACTION
-
Buyers Dominate InvestmentTransactions
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015
56% 54%
24% 35%
21%11%
Both
Sellers
Buyers
Q: Who did you represent?
-
MoreTransactionsConducted in SouthernCA
Q: Where was the property located in your last investor
transaction?
23%15%
24%
27% 45% 30%
50%40% 46%
1% 0.4%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015
Another State
Southern CA
Other CA
Northern CA
-
Nearly Properties in Suburban Location
Suburban 46%
Urban/citycenter 40%
Rural 13%
Other 1.5%
Q: How would you describe the location of the property
purchased?
-
Multifamily Purchases Increasing
78%
14%
1.1%
7.2%
73%
19%
0.9%
6.7%
72%
21%
0.9%
7.0%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
Single family home Multifamily Bulk sale Other
2013
2014
2015
Q: What type of property did your investor client purchase?
-
Slightly More Property Units PerTransaction
0.0
1.0
2.0
3.0
4.0
2013 2014 2015
3.8 3.54.0
#o
fUn
its
Average
Q: How many units did the property have in your last investor
transaction?
-
MajorityTransactions Not Distressed
Q: Was the property a(n)?
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2014 2015
70%80%
12%
13%18%
7%
Short sale
Foreclosure
Equity
-
Initial Listing PriceGrowing
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
2013 2014 2015
$307,500$322,500
$381,500
Median List Price
Q: What was the initial listing price?
-
Final Sale PriceGrowing
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
2013 2014 2015
$292,000$320,000
$375,000
Median Sale Price
Q: What was the final sale price?
-
Listing Price 1.7% > Sale Price
$0
$50,000
$100,000
$150,000
$200,000
$250,000
$300,000
$350,000
$400,000
Listing Sale
$381,500 $375,000
Median
-
TransactionCost Rising
Q: How much did it cost to purchase the property?
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2013 2014 2015
$9,000
$12,000
$15,000
Median Cost
-
Most Investors Made Minor or No Repairs
0%
20%
40%
60%
80%
100%
20132014
2015
18%22% 30%
51%39% 39%
22%
22% 18%
9%17% 12%
None Minor cosmetic Major cosmetic Major remodeling
Q: What type of rehabilitation/remodeling was done to the
property?
-
Median RemodelingCost Declined
$0
$2,000
$4,000
$6,000
$8,000
$10,000
$12,000
$14,000
$16,000
2013 2014 2015
$10,000
$15,000
$10,000
Q: How much did your client invest in rehabilitating/remodeling
the property?
-
InvestmentCost is 7% of Sale Price
Purchase Price$375,000
Transaction cost$15,000 (4%)
RehabilitationCost $10,000
(3%)
-
Expected Rate of Return Down
Q: What is the expected rate of return on the property
investment?
0%
2%
4%
6%
8%
10%
12%
14%
16%
18%
20%
2013 2014 2015
19%
17%
13%
Average
-
Majority Investors Rented Properties
73%
58%65%
20%
28%26%
7%14% 9.7%
2013 2014 2015
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Other
Flip
Rental
Q: What was the intended use of the property?
-
Top Reasons for Buying Now
6.9%
6.9%
8.8%
38%
39%
0% 5% 10% 15% 20% 25% 30% 35% 40% 45%
Size
Other
Future development potential
location
good price
Q: What motivated your client to buy now? (multiple
response)
-
InvestorsOwn Fewer Properties
90%83% 83%
6.5
8.3
6.4
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
0.0
1.0
2.0
3.0
4.0
5.0
6.0
7.0
8.0
9.0
2013 2014 2015
%
W
h
o
O
w
n
O
t
h
e
r
P
r
o
p
e
r
t
i
e
s
#
o
f
P
r
o
p
e
r
t
i
e
s
% who own other properties Average # of other properties
Q: How many other investment properties does your client
own?
-
2/5Other Investments Located inCentral &OtherParts ofCA
29%
50%
42%44%
41%
33%
21% 20% 21%
0%
10%
20%
30%
40%
50%
60%
2013 2014 2015
Other CA Southern CA Northern CA
Q: Where are those properties located?
-
Q: How many other properties did your last investor client
purchase within the past 12 months?
average: 1.847% investors purchased other
properties within past year
Minimum: 0 Maximum: 30
# other propertiespurchased within
past year
-
65% of PropertiesWere Found on MLS
Other
Another agent's private listing
Client found property
Directly from seller
My listing
MLS
0%20%
40%60%
80%
5.2%
2.6%
5.2%
5.8%
15%
65%
Q: How did you find the property for your client?
-
Future Price Predictions Positive
0.6% 1.9%
25%10%
70%
75%
5%13%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
In 1 year In 5 years
Don't know
Up
Flat
Down
Q: Do you think real estate prices in the neighborhood where the
property is located will go up, down or stayflat?
-
Intended Length of Ownership Declined
7.9 8.0
6.1
0
1
2
3
4
5
6
7
8
9
2013 2014 2015
#
o
f
Y
e
a
r
s
AverageYears
Q: How many years does your client intend to keep the
property?
-
2/3 Properties Managed byOwner
67% 69% 66%
27% 22% 24%
8% 11% 10%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015
Other
Property manager
Owner
Q: Who will manage the property?
-
19% of Investors Didnt HaveAny Concerns
Q: What were your clients biggest concerns during the
transaction?
Profitability (11%)
Closing (8.2%)
Renovation/repair costs, price (7.2%)
1031 exchange, future value (5.2%)
Finding tenant, property condition, financing (4.1%)
-
Investors Finding Property as Fast as LastYear
Q: How many weeks did you spend looking for a property with your
client?
9.9
6.8 7.0
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2013 2014 2015
#o
fWe
ek
s
Average
-
InvestorsViewed More Properties
11.1
6.9
8.7
0.0
2.0
4.0
6.0
8.0
10.0
12.0
2013 2014 2015
#o
fP
rop
ert
ies
Average
Q: How many properties did you view with your client prior to
the client making a purchase?
-
Fewer MultipleOffers
79%
63%54%
4.2
2.7
2.0
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
4.0
4.5
2013 2014 2015
%M
ult
iple
Off
ers
#o
fOff
ers
% Multiple Offers Average # of Offers
Q: How many offers did your client make on other properties?
-
Sellers Received 3.3 Offers on Average
Q: How many offers did the property purchased by your last
investor client receive, including that of yourbuyer?
3.3 3.3
0.0
0.5
1.0
1.5
2.0
2.5
3.0
3.5
2014 2015
#o
fOff
ers
Average
-
FINANCING
-
Majority InvestorsContinue Paying Cash
67% 67% 66%
33% 33% 34%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2013 2014 2015
Financing
Cash
Q: How did your client pay for the property?
-
Most Cash Funds from Previous Investment
Q: What was the source of the cash funds in your last investor
transaction?
Private investors
Personal savings
Proceeds from previous investment
0% 10% 20% 30% 40% 50%
20%
42%
49%
-
Majority Financing from Bank
Q: What was the source of the financing in your last investor
transaction?
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%
Other
1031 exchange
Private investors
Bank loan
4.2%
6.3%
23%
75%
-
CLIENT AGENTRELATIONSHIP
-
Many REALTORSGetting Repeat Business
0% 5% 10% 15% 20% 25% 30% 35% 40%
Client responded to my ad
"For Sale" sign
Prior dealings with my brokerage
Relative
Other
Friend
Client found me online
Refferal
Previous client
3.4%
4.1%
4.1%
5.5%
7.5%
11%
11%
17%
36%
Q: How did you establish a relationship with your last investor
client?
-
GreatestChallenges inWorking w/Investors
Q: What was your greatest challenge in working with an investor
buyer?
0% 5% 10% 15% 20% 25% 30%
Transaction costs
Price
Transaction terms
ROI
Finding the right property
3%
5%
5%
10%
27%
-
Biggest Difference inWorking w/Investors
Q: What is the biggest difference in working with investor
clients compared to residential clients?
0% 5% 10% 15% 20% 25% 30%
Financing
Calculating ROI
Faster decision
Easier transaction
Less picky
More knowledgeable
Less emotional
Profit driven
2.4%
3.7%
3.7%
4.9%
4.9%
7.3%
21%
27%
-
55% Investors DidntAnalyze Return Potential
Q: How did you and your client analyze the investment return
potential of the property the client purchased?
0% 1% 2% 3% 4% 5% 6% 7%
GRM
Cap rate
Comps/CMA
0.7%
3.7%
6.6%
-
Most Essential Info to Investors
Q: What information was essential to your client in his/her
decision to purchase that particular property?
2.8%
5.6%
10%
13%
15%
15%
15%
23%
0% 5% 10% 15% 20% 25%
Rental restrictions
Property condition
Market rent
Other
Comps
Price
ROI
Location
-
Marketing to Attract Investors
Q: What kind of marketing do you do to attract investor clients?
Please select all that apply.
None 46%
Online 34%
Other 18%
Print 2%
-
INVESTOR DEMOGRAPHICS
-
Most Investors are Individuals
0%
10%
20%
30%
40%
50%
60%
70%
80%
Individual LLCCorp
LLPOther
72%
22%
2.3%0.8% 3%
Q: Was your client a(n)?
-
Over Half of Individual Investors areWhite
African American/Black
Other
Hispanic/Latino
Asian
Caucasian/White
0% 10% 20% 30% 40% 50% 60%
3.6%
9.5%
13%
19%
55%
Q: How would you describe your clients ethnic background?
-
More Minority Investors in 2015
7.9% 9.7%
14% 11%13%
29%17%
19%
49%60% 55%
0.0%
20.0%
40.0%
60.0%
80.0%
100.0%
120.0%
2013 2014 2015
Caucasian/White
Asian
Hispanic/Latino
Other
African American/Black
Q: How would you describe your clients ethnic background?
-
5% Foreign Investors
Q: What is your clients country of permanent residence?
U.S.A. 95%
Foreigner 5%
-
Annual Income/Revenue 25% Lower
$0
$50,000
$100,000
$150,000
$200,000
20132014
2015
$160,000
$200,000
$150,000
Median
Q: What is your clients annual income/revenue?
-
RECAP
-
Investor Market Shrinking
-
The Bright Side
-
The Bright Side
-
Investors are Good Clients
More affluent
Pay cash
Less picky
Own otherproperties
Moreknowledgeable
Need propertymanagers
Less emotional
-
Understanding California HomeSellers
Thursday, April 30, 2014
2:00 PM 2:30 PM
To register:
WWW.CAR.ORG/MARKETDATA/VIDEOS
Join us for our next webinar
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