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Coach
if investors weren’t buying the crappier properties they would go for cheaper. Meaning the next layer up would go for cheaper and so on.
I saw a few months ago in Austin - 40% of single family homes were bought buy investors as of late. Absolutely that increases price. It’s classic supply and demand.
In my neighborhood in chicago 25% easily belong to investors who are just letting them sit and fall down. Perhaps not the same elsewhere but it's doing a good job of driving up prices. These empty places are selling for $600k
Subject Expert
Investors can often bring more cash to the table than someone buying a personal residence, and they can often overpay if there’s a plan to add value or a long term projection of rent growth or cashflows that justifies the initial capital outlay.
Personal residence owners are emotional, and often tied to mortgages and appraisals. Investors are driven by return on capital and projected value in several years.
Are you talking about Mr and Mrs Smith buying a handful of properties or Invitation Home buying billions of real estate? The second has investors to make happy and sitting on cash is much worse than picking up a rental that doesn’t have the perfect return. As such, they are willing to pay top dollar, and much importantly, can easily pay top dollar. “Making payments” is real easy for cash generating properties that you are buying with less down and better rates than Joe Schmoe. Are you looking past the hundreds of billions raised by institutional investors for rentals while home prices continue to outpace household income?
PwC2, a wonder if institutional investors suchs as Invitation Homes are chanhing their buying strategies too. Until last year, they were able to raise capital (sell bonds) at < 2.5%, however now in June those bonds are at +5%.. The cashlows are probably tight or even negative…
Subject Expert
Supply and demand. If there are two houses, and twenty people want a house, and the private equity firm buys one in cash, there’s only one house left, and whoever pays the most out of those 20 people will get it