In response to higher home prices nationwide, real estate investors are planning to reduce their purchase volumes in the next 12 months and hold their rental properties for at least five years. The trends are part of a report commissioned by MemphisInvest and Premier Property Management Group that followed up on an August 2012 survey of the same nature. In the August survey, only 30 percent of investors planned to buy fewer properties in the next 12 months than they had the previous year; the more recent report indicates that nearly half (48 percent) of all investors plan to purchase fewer properties and only 20 percent plan to increase purchase volumes[1]. 10 months ago, 39 percent of investors planned to increase purchasing volumes.

While this might sound like bad news for the housing market at first, the trend actually indicates that investors are shifting their focus in real estate to “realize the benefits of rising rents and low vacancy rates,” said Chris Clothier, aMemphisInvest and Premier Property Management Group partner. “Cash flow is much more important than appreciation,” he added. Clothier also noted that many investors have “a perception that the best time to buy is gone,” perhaps because “there are fewer homes to purchase [and] they have competition from larger buying groups”[2]. Huge investment firms like the Blackstone Group (BX) are spending billions of dollars to on tens of thousands of properties in order to create new asset classes for their investors, thus driving up housing prices and creating a situation in which many investors believe the best option is to buy good properties and hold them as rentals for cash flow and, hopefully, appreciation.

Are you changing your real estate investing strategies as home prices rise and the inventory shrinks (at least temporarily)? Do you believe that the time to buy property in bulk has passed?




by Carole VanSickle