2015 Residential Real Estate Investor Report

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2015 the annual residential real estate INVESTOR REPORT

Transcript of 2015 Residential Real Estate Investor Report

Page 1: 2015 Residential Real Estate Investor Report

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t h e a n n u a l r e s i d e n t i a l r e a l e s t a t e

I N V E S T O R R E P O R T

Page 2: 2015 Residential Real Estate Investor Report

Each year, leading residential real estate lender Visio Financial

Services conducts a survey of the residential investors in their

database to better understand their customers’ needs, as well as to

track growing trends in the ever-changing real estate market.

With more than 14 million single-family rental properties in the

United States, the residential real estate investment market is a

multi-billion dollar investor opportunity annually. Further, it is

highly fragmented, with 68% of investors owning fewer than seven

properties. Despite this market’s size, the fragmentation has meant

very little analysis of this space.

Visio Financial, in business since 2011, has originated more than

2,800 loans to investors exclusively, yielding a deep understanding

of the real estate investing space.

Thanks to Visio’s market knowledge and sizable database, they

conduct an annual survey of residential investors at the start of

each year. Real estate investors, whether they own two properties

or 200, share their experience and plans, giving valuable insight

into the residential real estate market. Visio provides the resulting

Annual Residential Real Estate Investor Report to investors, lenders,

analysts and anyone else interested in this massive market.

t h e a n n u a l r e s i d e n t i a l r e a l e s t a t e

I N V E S T O R R E P O R T

Page 3: 2015 Residential Real Estate Investor Report

Investors Adapt to a Healthier Market

• Investment Portfolio Growth: 49% of investors are planning on

buying four or more houses in 2015, compared to the 25% who

actually bought four or more in 2014.

• Higher Price Bands: 63% more investors are considering

$200K-plus properties than last year, whereas interest in

sub-$40K properties has decreased.

• Broadened Property Searches: 34% of investors are searching for

investment property out of their home states as local property

deals dwindle.

Market Ripe for Rapid Growth

• Working Capital: 92% of full-time investors believe that access to

lower-cost loans could grow their businesses faster.

• Help Wanted: More than one-fifth of full-time investors need

more high-quality employees and contractors in order to sustain

their growth.

• Career Investors: 83% of part-time investors expressed interest in

going full time, provided they had more funding and quality deals.

• Minority Growth Sector: African-Americans comprise 22% of the

investor class, up from 15% in 2014, and significantly higher than

the general population (13%).

E X E C U T I V E S U M M A R Y

Page 4: 2015 Residential Real Estate Investor Report

01. INVESTOR PROFILE

Who are residential investors?

full time part time

44% 56%

34% 66%

married widowed divorced/ single other separated

68%

2%

13% 7% 10%

49% 8% 17% 11% 15%

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Investors mostly male, married

Compared to national averages, residential investors in the U.S. are more likely to be male,

married and African-American. At 64%, the percentage of white investors matches the

national average of 63%, but the proportion of investors who are black far exceeds the

national racial average of 13%. With the average number of married Americans hovering

around 50%, investors are 28% more likely to be married. While 68% of male investors are

married, only 49% of female investors are, with women more likely to be divorced (15% vs. 11%)

or single (11% vs. 7%). Men were also much more likely to be full-time investors versus women.

23%77%2.9 people in householdclose to the national average of 2.6

64% married

65% employedfull time

Average age52 years old

African-Americans make up 22% of the investor

class (up from 15% last year) versus 13% of the

general population. This shows an upward trend

of African-Americans entering the real estate

investment space.

22%13%

total population investorsDemographic highlights

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02. INVESTOR INCOME

How much money are investors actually making?

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0% 5% 10% 15% 20%

$0-$25K

$25K-$50K

$50K-$75K

$75K-$100K

$100K-$125K

$125K-$150K

$150K-$175K

$175K-$200K

$200K+

ann

ual

ho

use

ho

ld in

com

e

4

The median investor has a

total household income of

$100K-$125K, more than

twice the median income of

the average American.

• On average, 36% of totalhousehold (HH) income wasfrom residential investing

• 25% of investors make <10%of their total HH incomefrom investing

• 29% make 50% or more of HHincome from investing

• Only 4% make 100% of HHincome from investing

Investment income as percentage of total incomeBreakdown of total household income

25%

20%

15%

10%

5%

0%

percent of household income from investing

inve

sto

rs

100%<10%

Investor household income above national average, but success is concentrated

While the median income of the average American household is about $53K, median income

for residential investor households is at least twice that, falling in the $100K-$125K range.

However, investment income contributes only a fraction to their total income, with a quarter

of all investors making less than 10% of their total household income from investing. On

average, 36% of total household income was from residential investing, which means

investing doesn't pay all of the bills, even for the full-time investors.

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03. FULL-TIME INVESTORS

Can full-time investors grow their businesses?

©2015, Visio Financial Services | www.visiolending.com

cheaper loans

more/better deals

more/better contractors & employees

faster financing

92%

38%

20%

20%

5

Full-time investors held back by capital and scarce deals

About 44% of residential investors engage in it full time; 56% do so on a part-time basis.

When asked to name two to three things that would help them grow their businesses, a huge

majority (92%) of full-time investors cited better access to cheaper loans. The full-timers also

would like to see better deals (38%) and faster loan origination (20%). Interestingly, slightly

more than 20% said that if they had more high-quality employees and contractors, they

would be able to grow faster. Comments like, “Desperately need more workers,” were not

uncommon. Looking at the breakdown in investing strategy, full-timers are much more likely

to focus on flipping houses (44%) than are part-time investors (39%). Relying on rental

properties is much more preferred by part-timers (52%) than by full-timers (43%).

What do you most need to accelerate your business? Strategy preference

full time

part time

equal

prefer flip

prefer rent

PT56%

FT44%

investors part time

52%

39%

9%

full time

43%

44%

13%

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04. PART-TIME INVESTORS

Can part-time investors turn full time?

©2015, Visio Financial Services | www.visiolending.com

Lack of moneyto do more deals

Lack of accessto lender capitalto do more deals

Lack ofquality deals

No desire to be afull-time investor

58%

35%

19%

17%

PT56%

6

Part-time investors lack capital, deals to go full time

Part-time residential investors cited a lack of access to capital (35%) and lack of money to do

more deals (58%) as major impediments to going full time, whereas the full-time investors

had greater access to capital but bemoaned the cost. Like the full-timers, part-timers also

saw a need for more quality deals. A small number (17%) of part-timers stated that they have

no desire to become full-time investors, regardless of deals and capital. We asked part-time

investors what their full-time jobs were and received a huge diversity of responses, although

1/5 of them have sales-related jobs. Not surprisingly, jobs that aid in residential investment

success like construction, finance and real estate were cited by nearly 25% of respondents.

sales

construction

finance

management

realtor

other

20%

9%

8%

7%

7%

49%

Why are part-time residential investors not full time? What are the full-time jobs of part-time investors?

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05. PROPERTY OWNERSHIP

Will investors' portfolios grow in 2015?

©2015, Visio Financial Services | www.visiolending.com 7

2013 did buy

2014 planned to buy

2014 did buy

2015 plan to buy

26% 50% 12% 4% 8%

5% 57% 18% 8% 12%

50% 12% 7% 6%25%

6% 20%45% 12% 17%

0 1-3 4-6 7-10 11+

Investor confidence increases in 2015

Last year, we asked investors how many investment properties they bought in 2013 and how

many they planned to buy in 2014. Optimism was evident. Even though only 24% bought four

or more houses in 2013, 38% planned to buy that many in 2014. A year later, we find only 25%

actually bought the four or more properties they expected to buy, about the same as in 2013.

And this year? Optimism returns even stronger, with 49% of investors planning to buy at least

four houses this year. In fact, the number of investors planning to buy eleven or more houses

saw the most impressive increase this year, from 12% in 2014 to 17% in 2015.

Investors who bought or plan to buy four or more housesHow many investment properties did you or do you plan to buy? x4

60%

50%

40%

30%

20%

2013 actual 2014 planned 2014 actual 2015 planned

24% 25%

38%

49%

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06. INVESTMENT PROPERTY PRICES

How are investors adapting to a healthier market?

©2015, Visio Financial Services | www.visiolending.com 8

0% 10% 20% 30% 40% 50%

$0-$20K

$20K-$40K

$40K-$60K

$60K-$80K

$80K-$100K

$100K-$150K

$150K-$200K

$200K+

39%30%

51%46%

41%44%

30%34%

24%28%

17%22%

9%14%

8%13%

2014 price ranges considered

2015 price ranges considered

In what price ranges will you consider investment properties? Price ranges considered, by number of 2014 property purchases

0

1-3

4-6

7-10

11+

28% 47% 43% 30% 24% 13% 10%12%

32% 43% 44% 32% 25% 21% 13% 11%

18% 43% 43% 38% 33% 25% 17% 13%

49% 49% 51% 46% 37% 29% 23%57%

33% 57% 40% 30% 20% 17%40%40%

$0-$20K

$20K-$40K

$40K-$60K

$60K-$80K

$80K-$100K

$100K-$150K

$150K-$200K

$200K+

Investors increasingly look toward higher-priced properties

What price ranges do investors consider? More investors are looking at higher-priced houses

this year versus last year, with houses $40K and lower getting less attention. This is

likely in response to generally rising property prices and picked-over inventory. Interestingly, the

higher the price band, the greater the increase in the number of investors considering homes

in that range, with 63% more investors looking at $200K-plus houses this year than in 2014. We

asked investors in which price ranges they search for investment properties, and we found that

investors who are more active search the full spectrum of housing prices to find deals.

Investors who bought fewer than seven properties mostly searched in the sub-$100K ranges.

Page 10: 2015 Residential Real Estate Investor Report

07. PROPERTY PURCHASES

Are investors broadening their property searches?

©2015, Visio Financial Services | www.visiolending.com

2014 2015

23%25%

<10 mileshome

50% 49%

citywide

34%32%

statewide

34%31%

other states

9

Top 10 states for residential investing

2015: FL GA TX NC SC TN OH AZ CA MI67% 43% 36% 33% 30% 29% 28% 24% 22% 22%

vs. 2014: = = = = = +4 +2 = -3 +1

Financing sources that investors consider vary by geographic distance, but cash is king whether an investor buys in- or out-of-state.

Bank money, however, remains more local, with only 14% of out-of-state buyers considering it, versus 20% of those searching close to home.

50%

40%

30%

20%

10%

0%

<10 miles citywide statewide other states

cash

private lender

partner

bank

More investors venturing beyond home state for deals

Compared with last year, fewer investors are looking locally for properties, with less than half

saying they would consider searching citywide. In a sign that deals are getting more di�cult

to find, more investors are looking statewide and even outside their home state this year,

with 34% venturing that broadly.

For those investors who do consider properties outside their home state, Florida remains the

No. 1 location. While this year's top five states kept their 2014 ranking, Tennessee jumped

four spots this year, with rust belt states Ohio and Michigan gaining rank as well.

Cash preferred, regardless of locationProperty search distance from home

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08. INVESTMENT STRATEGIES

Is the grass greener with another strategy?

©2015, Visio Financial Services | www.visiolending.com 10

2013 actual strategy

2014 expected strategy

2014 actual strategy

2015 expected strategy

31% 21% 21% 17% 11%

25% 18% 23% 22% 12%

24% 22% 18% 11%27%

21% 21%21% 24% 13%

buy to rent only buy to flip only both, but primarily rent both, but primarily flip both equally

60%

55%

50%

45%

40%

2013 actual 2014 planned 2014 actual 2015 planned

50% 50%

58%59%

Investors want to expand their strategies but seldom do

In 2013, only 50% of investors pursued a non-exclusive strategy (i.e., mixing both rental and

flip properties), but 58% expected to do so in 2014. However, it turns out that they didn't

pursue multiple strategies like they planned, with 50% reporting non-exclusive strategies in

2014, mirroring the number in 2013.

And do investors again think their businesses might be enhanced this year if they expand

their investment strategies? They do, with 59% planning to pursue non-exclusive strategies.

Based on last year's trend, we expect the actual percentage to remain around 50% in 2015.

Investors who pursued or plan to pursue a non-exclusive strategyWhat is your primary residential investment strategy?

Page 12: 2015 Residential Real Estate Investor Report

09. INVESTOR FINANCING

Do flippers and landlords finance differently?

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Flippers love private money, landlords love banks

About 40% of investors get at least some of their purchase financing from private lenders,

but investors who focus on rental properties are less likely to work with a private lender or

partner than flippers are. In fact, only 27% of investors purchasing houses exclusively for

renting use private money, while 49% of the flip-exclusive investors will turn to a private

lender. On the other hand, flippers access bank capital much less frequently than landlords

do, and also resort to cash less often.

Typical sources of financing, by strategy

both equally

primarily flip

flip only

primarily rent

rent only

46% 21% 48% 25% 8%

62% 12% 51% 40% 10%

64% 38% 27% 12% 9%

68% 28% 37% 19% 9%

56% 12% 49% 30% 6%

cash bank private lender partner other

60%

45%

30%

15%

0%

cash bank private lender partner other

How do you typically finance investment property purchases?

Page 13: 2015 Residential Real Estate Investor Report

10. RENTER PROFILE

How does renter behavior a�ect investors?FOR

RENT

©2015, Visio Financial Services | www.visiolending.com 12

Most renters hope to purchase, but many prefer renting

To better help our landlord customers understand their renters, we analyzed the data we

received from non-investor survey respondents. We weren't surprised to find that poor credit

has forced many people into rentals and that most of them hope to be able to buy a home

within the next three years. But 22% of the respondents who identified themselves as renters

simply prefer renting, which is great news for the 88% of respondents who currently own at

least one investment property.

When did you last own your own home?

When do you expect to next purchase a home?

What’s your primary reason for renting?

What was your total household income last year?

last 3 yrs

3-5 yrs ago

5-10 yrs ago

never

17%

8%

25%

50%

<1 yr

1-3 yrs

3-5 yrs

5+ yrs

never

29%

44%

9%

9%9% poor credit

income

between homepurchases

prefer to rent

53%

14%

8%

22%

<$10K

$10K-$25K

$25K-$50K

$50K-$75K

$75K-$100K

$100K-$125K

$125K-$150K

18%

7%

7%

28%14%

14%

12%

$

Page 14: 2015 Residential Real Estate Investor Report

Simply put, we thrive on real estate. We’ve bought, sold or financed

more than $250 million in residential real estate nationwide, and we

understand the unique needs of residential investors.

Drawing on years of experience in the distressed property field, we

crafted our loan products with three words in mind: fast, simple,

dependable. As the fifth-largest hard money lender in the U.S. (as

ranked by Scotsman Guide), Visio o�ers unique mortgage loans

l o a n s f o r i n v e s t o r s , b y i n v e s t o r s

designed to meet the needs of investors purchasing single-family

residences. Since our founding in 2011, we have originated more

than 2,800 loans to investors nationwide. Our mission is to deliver

fast, simple and dependable mortgage financing that assists investors

in the redevelopment of houses into quality, a�ordable homes.

For more information about this report or Visio Financial, please

contact us at [email protected] .