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:
The full 16-page study report:
Joint BiggerPockets.com / Memphis Invest National Survey of Residential Real Estate Investors – September 2012 (Download as PDF)
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.The $9.2 Billion Impact of 28.1 Million U.S. Real Estate Investors by Joshua Dorkin