Don’t Be Intimidated By Wall Street Investors
Over the past couple of years you saw headlines everywhere talking about Wall Street and institutional investors gobbling up single family investment properties. It is assumed that a comment made by the investment guru himself (Warren Buffet) that if he had a way to manage the properties he would buy thousands of single family homes. Yes the world stood up and took notice. Here was a real estate market with distressed home prices and with a rebounding economy. It only made sense to invest while the prices were so low. When Warren buffet himself goes on national television and makes a statement endorsing single family homes as an investment the lights were all burning green. Investors came from all over the globe. To the surprise of many, institutional investors took center stage with their billion dollar check books as they started buying properties, dozens and even hundreds at a time. Many so called educational people started writing post about the death of the Mom and Pop investor.
(For our foreign friends the mom and pop investor is an expression we use to describe individual investors)
To clarify some Myth – understandings:
• Institutional investors dominate the market: Not true, the volume of single family homes purchased by institutional investors (while there were many) still only makes up about 1% of the total single family investment properties in the country. The truth is the Mom and Pop investors have always (and I believe will always) triumph in this investment class.
• Local real estate markets will become depressed as investors sell: Not True. While investor activity always does make some impact on the local real estate markets, sales will most likely be staggered.
The sheer number of different owners with their own varying exit strategies is very unlikely to suddenly come together and sell off their investments in one quick action. Considering many of these properties purchased went through a renovation process the properties will actually increase in value. These increased values will likely spread throughout the neighborhoods as well.
• As credit rebounds there will be too many rentals: also not true. Millenniums (young adults) do not have the interest level in owning a home at the same scale seen in previous years. This group prefers to rent. Populations continue to increase at a pace making housing shortages a bigger problem. Consider the NHBA (National Home Builders Association) are building homes at an increased pace to keep up with housing demands. Finally there are an estimated 30+% of adult children that have been living with their parents or other adult families to help reduce living costs. These people are now looking to move out on their own.
Single family home investing allows many individuals to create little businesses of owning real estate capturing the 5 wealth building principles of income, deductions, equity buildup, appreciation and leverage. Institutional investors cannot replicate the success of the little investor, as the little investor takes pride in understanding and monitoring the local markets and having their own personal skin in the game. When you have an interest in investing in single family homes you can visit our homepage for knowledge, education and even access to unlisted turnkey real estate.