Investors Favor Buy-and-Hold Rentals over Fix-and-Flip
More than half of real estate investors plan to buy more properties and keep them as rental homes, according to a recent survey of investor attitudes.
The Spring 2023 Investor Sentiment Survey by RCN Capital revealed that 53 percent of investors were targeting rental homes vs. buying to renovate and resell.
“The National Association of Realtors noted that existing home sales in May were down over 20% from a year ago, and ATTOM recently reported that the number of properties flipped in the second quarter of 2023 was the lowest number in almost two years, so it’s no surprise that investors are more focused on rental properties today,” RCN Capital CEO Jeffrey Tesch told DSNews, which reported the results of the survey. “Our survey results mirror the trend toward rental investments and reflects what we’re seeing in our current loan activity.”
Investors were split fiarly evenly on the current state of the real estate market: 30 percent said conditions are better now than they were a year ago; 32 percent said conditions are about the same; and 37 percent said they are worse, according to the survey. But views were mixed on the next six months. Thirty percent predicted improved conditions, 44 percent said no change, and 26 percent feared the worst.
Researchers said investors do not expect a housing price crash. Nearly 75 percent of those polled said prices will remain the same or go up slightly in the next six months. Approximately 35 percent of rental property investors expected to see property values increase, compared with 45 percent of flippers. And 32 percent of rental investors expect to see price declines, while the same is true of only 15 percent of flippers. And 39 percent of flippers think prices will be flat, vs. 33 percent of rental investors.
Investors overwhelmingly named higher financing costs and undersupply of homes as the biggest challenges today and going forward, the surveyed revealed. Mortgage rates continue to exceed 6.5 percent, which keeps inventory low and makes purchasing more expensive.
“Despite higher financing costs and the downturn in home sales, investors continue to be pretty resilient, with almost two-thirds believing that today’s environment is about the same or better than it was a year ago,” Rick Sharga, CJ Patrick Company CEO, told DSNews. “That’s probably good news for a housing market that may be heavily dependent on investor purchases to help accelerate its recovery.”
About two-thirds of rental homes in the United States are self-managed by their owners, which can be a challenge as new laws and restrictions are created. For rental property investors facing the more stringent duties, disclosure requirements, and increased legal liability, Dream Big Property Management is available in the Inland Empire of Southern California. For a no-obligation, 10-minute consultation, contact Dream Big at 951-778-9700.
The Spring 2023 Investor Sentiment Survey was put together using data by CJ Patrick Co., which queried real estate investors around the country aimed at identifying market challenges and opportunities and current trends. It was RCN’s first of a planned quarterly report.