They saying "location, location, location," still holds true for real estate. It appears more real estate investors are turning to niche properties and away from investing in single-family homes and multifamily properties and location tops the main reason to buy, according to a recent California REALTORS® survey.
In its survey of members about their interactions with real estate investors, the California Association of REALTORS® 2016 California Investor Survey found 10 percent of investors purchased commercial, land, mobile homes, or other types of properties in the past year, up from 7 percent in 2015 and 6.7 percent in 2014.
The share of single-family homes being purchased by investors has been declining gradually since 2013, with 70 percent of investors purchasing single-family homes in 2016, down from 78 percent in 2013. The share of investors who purchased multifamily properties also declined slightly from 21 percent in 2015 to 19 percent in 2016.
Among the reasons investors cited for buying include good location (38 percent), followed by rate of return (30 percent), good price (17 percent), and future development potential (7 percent).
"With fewer fixer uppers and distressed homes on the market, we are seeing investors shift their focus to prime properties with potential. They are also holding on to the properties longer," observed Karen Trolan, president of the Silicon Valley Association of REALTORS®.
The survey also found fewer investors (62 percent) are renting out their properties in 2016, compared to last year (65 percent). Twenty-six percent of investors are flipping their properties, unchanged from last year, but down from 28 percent in 2014. Twelve percent plan to leave the property vacant, use it as a vacation rental, or other use. A larger share of investment properties was located outside of the urban and suburban markets they previously dominated.
More than three-fourths of investors remodeled their properties. The median cost of the remodel increased from $10,000 in 2015 to $13,500 this year. Majority of REALTORS® (76 percent) working with investors believed the property would increase in value in one year. Long-term, 71 percent said the property would increase in value in five years.
Investors in 2016 are planning to hold the property longer - an average of 8.1 years, up from 6.1 years in 2015. They also own fewer properties - on average in 5.6 in 2016, down from 6.4 in 2015 and 8.3 in 2014. Additionally, a higher proportion of investors own other properties, with a record share located outside California (15 percent in other states and 2.4 percent in other countries).
With higher real estate prices and more investors purchasing other properties within the past year, the share of investors who obtained financing jumped sharply from 34 percent in 2015 – where it had been holding steady for the past three years – to 45 percent in 2016. Conversely, fewer investors paid cash in 2016 (55 percent), compared to last year (66 percent).
The Silicon Valley Association of REALTORS® (SILVAR) is a professional trade organization representing over 4,000 REALTORS® and Affiliate members engaged in the real estate business on the Peninsula and in the South Bay. SILVAR promotes the highest ethical standards of real estate practice, serves as an advocate for homeownership and homeowners, and represents the interests of property owners in Silicon Valley.
The term "REALTOR®" is a registered collective membership mark which identifies a real estate professional who is a member of the National Association of REALTORS® and who subscribes to its strict Code of Ethics.
Variations of this article have appeared in local area newspapers.
For further information, please email or call the SILVAR office at (408) 200-0100.