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Investors Are Buying Less, but Might Be Ready to Sell Now

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By Margaret Kelly

investor_house_in_handsCurrent market conditions are ripe for home sellers: Prices are up, inventory is tight (but improving) and mortgage rates are still at record lows. But homeowners who are looking to make their next move aren’t the only past clients you should talk to about selling.

It’s time to check your database for the names of real estate investors who bought a few years ago at rock-bottom prices who might benefit more in the long run from selling their properties rather than continuing to rent them.

According to recent data from Campbell’s HousingPulse Survey, investor purchases as a percentage of all home sales have been on a steady decline for much of this year, hitting 15.9 percent in August—a huge drop from a peak of 25.1 percent in February. One reason: Deeply discounted distressed properties are becoming a smaller portion of the housing pie, giving investors fewer options for low-cost investments.

Another key metric to look at is the investor absorption rate, particularly the number of investor property purchases that turn into rentals. In 2011, 50 percent of investors bought properties to convert into rentals. Today, nearly 70 percent of investors are buying to sell. Investors who bought a few years ago to rent might be more open to selling now.

As home prices continue to rise and interest rates inch toward the 5-percent mark, investors are less likely to buy and more likely to sell with market conditions in their favor. So how do you help these clients meet their real estate goals and get a great return on their initial investments?

First, go through your database and look for past investor clients whom you helped buy when the market was hot for buyers. In other words, you’ll be searching for investor transactions that closed from 2008 to 2012. Before you reach for the phone to schedule a meeting or talk about selling, do your homework. Look at what these properties were purchased for, and look at how those prices have gone up in recent years. Pull current comps and show investors the ROI of selling at today’s list price and how they could come out ahead instead of renting it long term.

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