Investors who scooped up foreclosure properties during the last few years are likely to hold on to them for the long-term, according to a real estate agent and a market researcher.
Much of the investor community embraced “buy-to-let” strategies, due to rock-bottom home prices and slow home price appreciation. The strategy has led to a strong stream of monthly income for investors, but a long delay before those properties come back on the market.
“Investors are likely to hold on to properties for another five-to-seven years,” said Cyrus Malholtra, a real estate agent for Blackstone Realty LLC in the Tampa Bay area. Blackstone Capital likely spent around $1bn on foreclosed properties in this region alone in 2011, according to the Tampa Bay Times.
“They did a successful job in this strategy,” Malholtra said, effectively raising rent prices of targeted communities by as much as $1,400 in some areas.
In a study done in Atlanta, Georgia, Dan Immergluck studied the way private investors were purchasing and selling foreclosed inventory. In “The Role of Investors in the Single-Family Market in Distressed Neighborhoods: The Case of Atlanta” published February 2013, Immergluck overwhelmingly found that “buy-to-let” was the common strategy over others, which shifted investors’ time horizons to five to seven years.
He also found that investors typically executed buy-to-let strategies in lower income communities inhabited by African Americans who could pay rent with housing assistance vouchers. He wrote, “Investors tend to prefer the stability and lower turnover that come with voucher holders as tenants.” He continued to explain that even if tenants ended up not paying, they would generally have enough to continue paying the utilities and therefore prevent criminal damage to the house – a typical cost that burdens investors.
Individual investor purchases were well over 600,000 in 2012, according to CoreLogic’s March 2013 Market Pulse Report. But that is not inclusive of institutional investors, for which the numbers are somewhat murky. Blackstone alone has committed to purchasing 15,000 homes in 2013.