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The $9.2 Billion Impact of 28.1 Million U.S. Real Estate Investors

by Joshua Dorkin on September 20, 2012 · 36 comments

  

As most of you know, BiggerPockets.com has been the online home for real estate investors for almost 8 years. Through that time, we’ve developed intimate knowledge of the investor market and mindset. However, we knew that simply stating our belief from those years of insight and access to investors was not going to mean much, if anything, unless it could be backed up by scientifically significant data. We felt it was imperative to quantify their impact and importance in the overall housing market and economy.

We knew from dealing with our 100,000+ members and millions of visitors that the VAST majority of real estate investors are involved in the industry because they want to better their financial situation for the long term.

Over conversations with our friends at Memphis Invest, we decided that the full impact of investors just wasn’t appropriately being covered, and thus concluded that we’d work in coordination to put together such a study. We linked up with Steve Cook, one of the smartest guys in the industry, and put together a survey to be conducted by ORC International, a leading global market research firm which has conducted the CNN|ORC International Poll since 2007. Our survey included three telephone surveys of 3,036 adults, 1,515 men and 1,521 women 18 years of age and older, living in the continental United States, and interviews were completed on August 9-12,16-19, and 23-26, 2012; the margin of error for the survey is +/- 03%.

The Results of the Survey are Nothing but Incredible

Please take an opportunity to review our report and news release below:

Today’s News Release:
Most Active Real Estate Investors Plan to Buy as Many or More Properties in Next 12 Months

The full 16-page study report:
Joint BiggerPockets.com / Memphis Invest National Survey of Residential Real Estate Investors – September 2012 (Download as PDF)

The Infographic
The Impact of 28.1 Million Real Estate Investors on Housing [Infographic]

The Impact of the Individual Residential Real Estate Investor is Huge!

Just as we suspected, while the individual investor wants to improve their family’s finances, and their neighborhoods, they are playing an unbelievably important role in housing. Some of the highlights of the report include:

More Than a Third of Real Estate Investors Plan to Buy More

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. According to the National Association of Realtors, last year investors purchased 1.23 million homes, a 64.5 percent increase over 749,000 in 2010. If you do the math, it looks like 2012 should be as good or better than last year thanks to the individual real estate investor.

Real Estate Investors spend $9.2 Billion a Year to Repair Housing

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 $7,500 per property, we found that investors are spending a total of $9.2 billion per year to repair the damage caused by foreclosures and rehabilitate our local neighborhoods. By comparison, over the past four years Congress has authorized a total of about $7 billion for the Neighborhood Stabilization Program, the federal 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.

That’s $9.2 Billion spent on local businesses and on local labor. If you consider that approximately 50% of the cost of a rehab goes to labor and 50% to materials, we’re talking about a $4.6 billion impact on local labor markets and a $4.6 billion impact on local suppliers. That’s Billion with a B, folks!

Lower Interest Rates and Access to Credit Top Investor Incentives

One of the areas of the survey that really surprised us was in the amount of capital investors put forth on their investments and their willingness to put down large down-payments in order to access unlimited funding to further their investments.

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 of respondents 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.

One in three investors (32 percent) said that they are willing to put down more than 50 percent of the value of a investment purchase if there were no limits placed on the amount they could borrow from a lender to buy additional properties.

This demonstrates that real estate investors today are less like the speculators of 6 years ago, seeking out short term appreciation, and are more long-term minded. We’re now dealing with an investor who is in the game for the long-haul.

That folks, is significant.

Speaking of significant . . .

28.1 Million Americans are Residential Real Estate Investors

Surprised? For the past few years, I’ve been looking for an answer to the question: how many real estate investors are there? Unfortunately, there just wasn’t any great data to answer the question. Our study is quite revealing.

1 in 8 American adults consider themselves to be residential real estate investors or own residential investment property today. That 28.1 million people is broken up as follows: 3 percent or 7 million people, consider themselves to be real estate investors and an additional 9 percent of all American adults own investment properties today according to our study.

That number is about the same as the number of Americans who own ROTH IRAs (28.5 million) or the number of money market fund shareholders (29 million).

Hopefully you realize how significant that number really is and how important real estate investors really are.

Important Themes to Remember:

The housing market and economy are constantly in flux, but for the moment, demand for housing remains strong, new construction and existing home sales are on the rise, as are median home prices.

Our survey accurately measures investors’ purchasing intentions. Whether they result in an increase in investor purchasing in the months to come will depend on many factors, including access to financing, but it’s clear that investors will continue to play a critical role in the real estate economy.

We hope that you find the report to be valuable and we encourage you to carefully read through it and our survey results. We also encourage you to share your own insight into what those results mean — either below in the comments, or preferably on your own real estate blogs and websites. We’d love to see what you think is the most important revelation, and the potential impact of the survey. Of course, please do also share this article and the report on social media.

For details on the study’s methodology, please see the full report.

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{ 35 comments… read them below or add one }

Dale Osborn September 20, 2012 at 11:39 am

You have a very well documented article here with all the statistics and data lined up in a manner that is easy to follow. Every time we have to do some shopping at Home Depot, Lowes or Walmart for supplies, I always tell my wife “we have to do our part to help support the economy”. When you put all of the investors spending together it gets up into a staggering amount that is being spent along with keeping people employed in doing the labor as well.

Nice job on presenting all the facts!

Dale

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Joshua Dorkin September 20, 2012 at 11:51 am

Thanks, Dale! Keep making a positive impact on your local economy, and please do share this with your colleagues and peers.

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Travis September 20, 2012 at 1:04 pm

I absolutely agree we need to help support our economy. As you visit Home Depot and Lowes, make sure you look at where the products are made. While building my house I noticed the prices were very similar between the two retailers (and they would match prices if needed), but what they carried varied by origin.

One would have plumbing parts Made In USA, and the other would be Made In Mexico. One would have lumber from Canada, the other would be USA. Electrical supplies from China, the other from the USA. Appliances were a big one too. Lots of Chinese appliances when the US-made brand is the same price. 99% of the time I would buy the USA-made item so I could help support our own workers. The prices were the same (or very close), so why not keep 100% of my money right here in the US?

The biggest foreign purchase I had was my stove. I ended up buying a Kenmore (Mexico) because the only US-made stove I could find was a Viking that cost 3x as much. As much as I wanted to keep it US-made, I simply couldn’t justify paying $2,400 instead of $800.

Of course there were certain things (saws, drills, etc.) that were all foreign made, so there wasn’t much choice. But, if I had the choice, I made sure to buy as many US-made items as I could.

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Chris Clothier September 20, 2012 at 2:17 pm

Dale –

That is a point that Josh and I were wondering if investors and even the media for that matter were really gong to catch onto. So often, the data stops at real estate purchases. That is a big number that is tracked. But the amount of money investors spend renovating properties is where the real impact is felt. Individual investors are set to spend billions of dollars renovating investment properties. That investment property will become a mini engine in the local economy and spur other actions for the area. And as the study pointed out, these dollars are not insignificant. They are a major reason why local electricians, plumbers, carpenters and general laborers are able to keep working and don;t have to close up shop and look for a job elsewhere.

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Chris Clothier September 25, 2012 at 4:37 pm

Dale –

The cool thing about this study is that there was no beginning end-game in mind. Both Josh and I are fairly well connected through our companies to individual investors and their needs and wants, but thought simply stating what we thought would have no impact. So we commissioned this study and really were blown away by the results. And…Josh did an excellent job of detailing the study here for all of the BiggerPockets Blog readers.

Chris

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Aaron norris September 20, 2012 at 3:04 pm

Sent and sent. Great work guys. That’s a ton of phone calls and data to crunch.

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Joshua Dorkin September 28, 2012 at 11:38 am

Thanks Aaron (& picture of Bruce). We definitely appreciate the support.

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Terri September 20, 2012 at 7:05 pm

Excellent information! And it’s pretty much right in line with what I thought. Investors are a huge part of the recovery of the real estate market and the economy in general. I’m not saying we alone are going to save the day. But if the powers that be would realize the untapped potential they have in us, the investors, they would (I hope) learn to give us a little more help with those interest rates and lending restrictions.

I, for one, buy my properties so cheap, that I’d be happy if a lender gave me 50% of its value, and I’d pay up to 6% for that loan if need be. Even that is asking too much of them today, apparently. So for now, I pay cash. Of course, if I had access to more favorable financing, I could be pocketing so many more properties and buying more renovation materials and putting many contractors to work.

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Chris Clothier September 25, 2012 at 5:19 pm

Terri –

Those are great points and exactly what the study pointed out. Many real estate investors today are exactly that – investors! They are not speculators and are not looking for a free ride. They are willing to invest their money in return for access to capital that will allow them to purchase more properties, purchase more supplies and, in-turn, hire more labor. All of which supports local economies.

Chris

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Joshua Dorkin September 28, 2012 at 11:41 am

Thanks for the feedback, Terri. We appreciate the insight and agree with your assessment of the untapped potential of the investor segment. Thank you for taking the time to comment.

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Sir Don September 21, 2012 at 3:42 pm

Wait a minute are you sure them numbers are right Didn’t Mitt say that 47% of the people live off the government so I know they are not buying real estate right there just buying new car, close, and 66″ TV’s for the property they rent and we pay for…………..

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Mike September 22, 2012 at 3:37 pm

Incredible data here Josh, you certainly have done your homework and then some. I honestly had no idea there were as many people were doing what we’re doing and adding so much ($9.2 b in repairs?? Wow) to the housing market. This is the kind that the major news outlets would love to get a hold of, which I’m sure you’ve already thought of. Very nice work.

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Joshua Dorkin September 22, 2012 at 4:30 pm

Thanks Mike. The data is definitely incredibile and newsworthy. We’ve gotten a fair amount of coverage so far, and as people dig deeper into the report, I’m certain it will be referenced for some time to come.

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Rebecca Bennett September 22, 2012 at 7:49 pm

Lemons to Lemonade, The American Way!

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Joshua Dorkin September 28, 2012 at 11:42 am

That’s how we do it, Rebecca!

John Rod. September 24, 2012 at 3:00 pm

Great report, and stacts. Now, I would really like to see this forwarded to the president, so that investor’s financing would be that much easier and cheaper. I’m a full time real estate broker/investor, if the financing was there, I would most certaintly put 50% down on all my pojects, having the reassurance that I could unlock that funds easier and cheaper to put towards the next projects. I’m in the east coast, real estate investing here is nothing close to the $7500 here averaged, more like $50-100k depending where you are. If I’m putting my money where my mouth is, Im 24/7 365 doing real estate, have the record, and the portfolio to proof it , why am I not being help to stimulate the economy ? …. This real estate FULL OUT Investors financing is a massive topic to hit , its critical for our overall impact , and critical for the economy. I loose on average 4-8 projects yearlly , because of having funds tight up, we are loosing labor, profits, and local business.

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Dale Osborn September 24, 2012 at 5:14 pm

With all of the other government bail-outs and mortgage assistance programs, do you really think forwarding it to the president would help our cause in any way shape or form?

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Joshua Dorkin September 28, 2012 at 11:50 am

Hey Dale –
Those political leaders that are party to the legislation that manages how things work in the real estate & lending business would do well to look at our data. I think it provides some remarkable insight into the mindset of the investor and how willing they are to spend even more money helping to repair and renovate out neighborhoods. Without data like that which we managed to find, politicians don’t have the intelligence to make decisions.

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Joshua Dorkin September 28, 2012 at 11:47 am

Hey John –
We agree that the powers that be in Washington would do well to take some time to review our study results. Please do feel free to share it with any and all the politicians you feel could put it to use. If citizens like you and I aren’t helping to inform them of these things, they’ll have no other way of knowing.

We’re glad you found the report to be valuable!

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Jimmy Pike September 24, 2012 at 4:52 pm

Keep me updated on VA VENDEE Financing

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Joshua Dorkin September 28, 2012 at 11:51 am

Jimmy – I don’t believe the article above references VA Vendee financing. Sorry.

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John Rod. September 25, 2012 at 10:11 am

Dale,

Out of sight out of mind, not having this kind of report and info handy hasnt helped us much, which is one of the reasons Im sure that Joshua invested the time to get it done. Banks and car makers have had bail outs because of their exposure and bottom line impact in the economy, us (full time investors) directly pump the economy through our local business demand ,and labor. It will be a much more worthy investment for the gov to have handy finance programs for individuals who have a track record, and worth given flexible loans to. From where I see it and the requirements that should be in place for such programs, it can be a fully collateral insured money on money investment with a max of 50% LTV, which will require us serious investors to be committed. 2x on our money , and provide double the labor, and stimulation to the economy….Much less risky investment than bail outs , and much less the over all monetary investment, with double the upside potential. Why not ?

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Chris Clothier September 25, 2012 at 5:47 pm

John –

I think your commentary is spot on and I believe there are a substantial number of real estate investors that share your sentiment. The report shows it!

Randomly reached individuals became self-identified investors in this study and they stated that they would absolutely be willing to place down larger down payments in return for greater access to capital to leverage their money. That opportunity, the chance to have a greater impact AND earn a profit from it, are the driving reasons investors want the opportunity. They aren’t looking for an easier road and clearly do not want a return to 100% loans and easy qualification financing. They are willing to do their part and separate themselves form the real estate speculators.

Thanks for taking time to read and leave a comment –

Chris

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Dean September 25, 2012 at 12:33 pm

Given that much more comprehensive research states that there are 21 million rental properties in the USA and that many investors own more than 1 I would have to say this report looks very flawed. Also looking at the numbers you basically had 190 odd complete replies. Hardly serious analysis.
I am not attacking this report per se simply saying it looks to be seriously flawed compared with much more serious research and the number of investors in the USA is definitely wrong. You can’t have 28 million investors when the rental pool is not that big.

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Chris Clothier September 25, 2012 at 4:33 pm

Dean –

I find it interesting that you cite more serious research in your post. This is the first study of its kind using industry accepted standards for gathering data and the first to specifically requests that investors self identify. I don’t think that questioning ORC’s collection of data and their years of preparing and perfecting CARAVAN studies and using sampling to forecast the results makes your point any more impactful.

According to the American Housing Survey of the United States, conducted every two years by HUD, there are 125 million housing units in the U.S. that are not seasonal homes. Of those, 36 million are identified as occupied rental properties. There are an additional 13 million un-occupied rental properties, however only 10 million of those are vacant for rent or vacant for sale.

Added together, according to the latest research published in 2009, there are 45 million rental properties in the U.S. IF there are 125 million housing units and 45 million are rental properties, then it stands to reason that our study using industry standards is correct. That rings true with the U.S. housing data showing roughly 64 – 66% of all single family homes in the U.S. are owner occupied. Both numbers weight out that 28 million investors is most likely very accurate. Considering that today’s real estate investor purchase any manner of property from single family detached homes to single family attached homes, tri-plexes, four-plexes, condos, mobile homes, small apartment buildings.

That being said, you question our study and the results without pointing out that, as with any sampling study, we cite the 3-10% variance in the data. We clearly state that in the report as all serious studies will do. If our data were wrong on the high side, then there are 25 million real estate investors.

As a last note, I wonder if you would be willing to actually name the “more comprehensive and more serious research” that you are citing. Our data is clear and concise and laid out for all to see…

The great thing about this study was that it was conducted with a blank slate and 100% by an independent and very well-respected leader in the Omnibus survey industry. The manner in which it was conducted is beyond reproach and as it was conducted without an end slant in mind, it’s results – and the results of the next and the next and the next – will hopefully become the standard bearer for the serious news media on investor sentiment and impact.

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Dean September 25, 2012 at 10:59 pm

Well the Multi Housing council, National Association of Realtors, U.S. Census bureau and a recent Harris Interactive in depth study, (compiled by Real Trendz and Personal Real Estate Investor Magazine with The Home Depot, Keller Williams, Remax, Real property Management and The National tenant Network) all agree that there are around 21,000,000 rental doors in the USA in the hands of individual investors. The average investor owns 2.6 properties so there are around 10,000,000 real rental owners or investors.

Given the tiny sample this study interviewed it is unlikely that it uncovered something contrary to the above research which is all consistent.
As an international investor to conclude that there are more investors as a percentage of population than countries like Australia, New Zealand and Singapore where investing is a national sport is so unlikely one has to question the data.

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Steve Cook September 26, 2012 at 7:43 am

Trying to calculate the number of single family rental units from our survey is sort of like trying to figure out the number of farms in America by totaling up the number of farmers, their wives and immediate families, relatives, lenders and virtually anyone with an ownership stake in a farm. Obviously, that’s not going to work and that’s not what we intended to do.

Rather, we sought to find out more about the total number of people invested in single family properties, not how many properties exist. We found that about 3 percent of the total 3036 respondents in the survey are active investors─buying or planning to buy properties within the next 12 months. Another 9 percent own residential investment property but don’t consider themselves to be investors. Many of these are simply homeowners who rent out a vacation home or who have moved during the past six years and choose to rent their old home rather than sell at a loss. All, however, share a common interest in issues important to investors such as tax treatment of rental income and capital gains, and landlord-tenant laws. The 11 percent represents some 28.1 million Americans when you do the math.

One of the reasons we undertook this survey was the paucity of valid data on investors. Many of the surveys conducted by others are Internet surveys, including the one you cite. These are less expensive than telephone surveys and they serve useful roles, but coming up with accurate national data is not one of them. Often people who are busy or who don’t feel strongly about a topic will not participate in an Internet survey, which creates an inherent bias. This is probably why so many past surveys have undercounted the number of passive real estate investors. Our survey was conducted by one of the world’s leading research firms, ORC International, which also conducts the CNN/ORC Poll. It was a telephone survey, generally considered to be more accurate than Internet surveys by statisticians and opinion researchers. To increase accuracy, our sample was three times larger than normal, not “tiny” by any measure.

Because of the problems with Internet surveys like the Harris Interactive one, many national media outlets will not use them. Some also require that surveys they cover reach both land line and mobile respondents, as ours did. Though our survey cost about twice as much as an Internet survey, we’re pleased to note that Bloomberg and BusinessWeek as well as many other national real estate and financial media carried excellent articles on it.

Above all, we hope the survey will increase public understanding of the vital role investors play in the housing economy by presenting more accurate and comprehensive data than past efforts.

Thank you for your interest.

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Dean September 26, 2012 at 11:19 am

Trying to calculate the number of single family rental units from our survey is sort of like trying to figure out the number of farms in America by totaling up the number of farmers, their wives and immediate families, relatives, lenders and virtually anyone with an ownership stake in a farm. Obviously, that’s not going to work and that’s not what we intended to do.

Agreed but when the average investor owns more than 1 rental and you have found more investors than rental properties one has to question the data. That is all I am saying. The sample is so teeny as to have made the results irrelevant. It’s like monitoring the weather outside a dozen random houses for a week and then reporting on US sunshine hours and rainfall. :-)

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Joshua Dorkin September 26, 2012 at 11:51 am

Thank you for sharing your opinion. Clearly you disagree with our findings, and you’re more than welcome to do so. Good luck to you.

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Deidre September 26, 2012 at 1:53 pm

Dean, I’m not sure why you disagree with the results of their study, but the numbers you are citing are not correct. I found this data on page 8 of the U.S. Census Housing Data for 2010. Here is the exact quote:

“Among the 40.9 Million renter-occupied housing units in the nation, about a third (35.6%, or 14.5 million) were located in the South and a quarter (24.9 percent, or 10.1 million) in the west. The remaining renter-occupied homes were about evenly distributed between the Midwest (19.8 percent, or 8.1 million) and the Northeast (19.7 percent, or 8.0 million).”

It clearly states that there are 41 million (rounded) renter-occupied units.

Are you saying that the U.S. Census is wrong? You cited it earlier as one of those studies refuting the findings, but it appears to actually back it up.

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Brian September 26, 2012 at 4:46 pm

Great Read!!!! I just recently came across this article and survey and WOW!! It would appear to me that the federal government needs to look at the individual investors and take notes. We investors have poured tons of money back into the local economy. I personally own 28 rental properties and I am on the high side of the surveys rehabs. My average rehab is $14,500 and I see it not only as a great investment, but I am helping redevelop a neighborhood by taking an eyesore and creating a great home for a lucky family. But just like the federal government, they do nothing to help us, but they sure will throw money by the bucket full at the big industry in bailouts. It’s also interesting that there are so many individual residential real estate investors that have the same outlook as I do. Real estate investing is a no brainer as long as you don’t over extend yourself, make smart real estate buys and have a GREAT RENTAL MANAGEMENT COMPANY taking care of your renters and properties. The last is essential!!!
Great Job pulling all this info together! It seems very complete and very extensive.

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Joshua Dorkin September 28, 2012 at 11:36 am

Thanks for taking the time to read the report and this article, Brian. I appreciate the feedback and support!

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Bill Lyons November 24, 2012 at 11:23 am

Wow, WAY more than I ever would of expected! I’ve heard numbers as low as 500,000 who are buying an average of 3 deals per year…all the way up to 2.2million buying an average of .63/year so 28.1 million comes as a surprise. That # does make sense (28.1 who have ever bought a residential investment property in their lifetime). So I guess it comes down to active vs inactive. If you are saying “active” = 3% or 7MM I still think that might make sense if you stack this survey against the NAR survey. According to NAR’s 2011 Investment and Vacation Home Buyers Survey, vacation-home sales accounted for 10% of transactions last year while the portion of investment sales was 17%, totaling 27% of new and existing home sales which comes out to about 1.4MM~ of the 5MM~ sales. I’m not sure if the NAR # includes 2-4units, I believe it is just new and existing SFRs, condos, etc. So even if the 2-4 units made up for the vacation homes and we rounded the # of to 2MM properties/year it would be 7MM active residential real estate investors buying .28 properties per year each. NAR’s survey also said that “47% are likely to purchase another investment property within 2yrs” so in our numbers 3.36MM will buy 1.68MM properties/year. So yes it seems like the numbers are aligning…very exciting!

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Chris December 6, 2012 at 2:20 am

Real estate has always played an important role in the US economy. Kudos to the these high-risk chasing investors for turning the corner on the housing market.

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Cynthia Badiey July 30, 2014 at 2:56 pm

I know I’m coming late to the party, but did any of your research look at the demographics? Specifically, how many of these real estate investors are women?

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