Buy and Hold is the New Flip

CNN ran an article about changing trends in property investors.

This July, investors flipped only 50% of their purchases, down from 75% a year earlier, according to Tom Popik, research director for Campbell Surveys, which tracks housing trends for major banks and government agencies. They held onto the rest to rent out.

Full article on CNN Money

Why Are Investors Choosing To Buy and Hold Their Real Estate Invesments?

Prices: When the market started to meltdown in 2006 the banks weren’t prepared. At all. There were no systems in place for all the volume of foreclosures and short sales. Fast forward 5 years and now they understand their problems far better and have systems in place to manage distressed properties. The up shot of this is there are slowing foreclosures as more short sales are being successful. Less opportunity to buy at fire sale prices at auction means it’s harder for investors to walk into significant equity on day one.

There’s good deals out there but it’s getting harder and harder to buy a house for $100,000 knowing you can turn round and sell it for $200,000 the next day.

Rents: The rental market is good here at the moment. What you can rent for $2,000 is nothing compared to what you could buy that would be equal to a mortgage payment of the same amount. If you can be confident of renting a property the associated risks of bad tenants, vacant rentals etc seem less.

Money: Borrowing is cheap. Very cheap at the moment. Investors often like to use leverage. Using other peoples money to buy houses is cheaper than ever before.

Opportunity Cost: When you hold an investment there is an associated opportunity cost of what else you could be doing with the money. A lot of investors feel that real estate at these levels is less risky and a better bet than other investments such as stocks and bonds.

Conclusion

In every market there are opportunities. If you are considering purchasing a home that you will rent out to tenants please feel free to give me a call to discuss what is available at varying price points.

 

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