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A Report on The Purchasing Power of Institutional Investors in Single-Family Homes

Institutional investors currently own more than 200,000 single-family homes in the US, according to RealtyTrac.

Do larger investors have buyer power in local housing markets relative to single-purchase buyers? The answer is yes, according a recently scholarly study of more than 70,000 home sales in Miami-Dade County between 2009-2013 by the Wisconsin School of Business.

The report defined an institutional investor as an entity that has purchased at least 10 homes.

How do big investors impact local markets? The study found that:

  • On average, all institutional investors paid 7.7% less than a buyer of one comparable single-family home.

  • Large institutional investors - six to 28 purchases - bought at an average discount of 13.6%

  • Medium investors - three to five purchases- paid an average discount of 11.1%

  • Small investors – two purchases – had an average discount of eight percent, compared to single-purchase buyers.

Not only was the size of the buyer an important factor, according to the report, but – no surprise here - cash was king as well. “Cash sales are attractive to sellers, because they know the deal can’t fall apart due to a mortgage contingency clause, and transactions can be fast-tracked, since there’s no need to wait for loan approval.”

The report also indicated “Large investors may also have more effective tools for identifying properties to acquire, stronger negotiating skills, and more experience with the closing process.”

The impact of institutional investors:

Property Values May Rise. “Property values rose in neighborhoods in which investment firms purchased real estate. In fact, a 10% increase in the number of houses purchased by investors in a census block caused a 0.20% increase in house prices in that market.”

Inventory of Foreclosed Homes May Decrease. “Large investors take distressed properties off the market, which may send the message to other buyers that those properties are undervalued, leading to more players entering the market and pushing up prices.”

For more information on why you should consider investing in a professionally managed portfolio of single-family homes, please contact Harold Willig at 917-209-4452 or harold.willig@springviewinvestments.com

Harold Willig is the Manager of SpringView Investment Management, LLC, which he founded in 2012. Mr. Willig also served as HFZ Capital Group’s Chief Financial Officer, and was responsible for the oversight of HFZ's Finance and Accounting team. He has over 16 years of finance and accounting experience. Mr. Willig also ran a consulting practice and provided valuation, analysis, and transactional support services to multi-billion dollar real estate companies. Previously, Mr. Willig served as the Senior Controller and Vice President of Financial Analysis and then the Chief Financial Officer of the Athena Group, a multifamily development company and fund manager.

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