A high percentage of single-family investors still buy to flip; however, noticeable volumes of buyers are adopting the hold-to-rent strategy.
Findings of an Auction.com investor activity report show that strategy is largely dependent on investor type, property location, and if the home is purchased online or via live auction.
“Most investor segments performed in a manner very consistent with what we’ve been seeing for about a year,” said Rick Sharga, executive vice president of Auction.com.
Sharga points to two major trends: the return of the “mom and pop” investor in the single-family rental space and more investors focusing on flipping properties in specific regions.
Mom-and-pop investors possess intimate knowledge of their local markets and are willing to buy properties that deliver long-term returns based on month cash flow.
Investors looking for short-term profits are eyeing flips in markets where prices have rebounded from the 2008 crash and for-sale housing inventory remains scarce.
Nearly 73 percent of survey respondents who indicated they were making a one-time purchase preferred a hold-to-rent strategy, with only 26.5 percent saying they will flip.
Respondents identifying themselves as full-time “real estate investors” and those indicating that they were working on behalf of another investor favored flipping.
Nearly 56 percent of full-time investors will adopt the flip strategy, with roughly 43 percent opting to hold and rent. Those working for another investor will acquire to flip nearly 64 percent of the time.
States where investors intend to flip the most include Arizona (71.3 percent), California (71.9 percent), Idaho (77.5 percent) and Nevada (70.4 percent). Washington and North Carolina represent additional states where more than 65 percent of investors are buying to flip.
Georgia, Tennessee and Texas represent states with the highest percentage of investors who are buying to hold and rent. Roughly 43 to 46 percent of investors in these states will adopt this strategy.
On a regional basis, a higher percentage of investors (53 to 55 percent) surveyed will hold and rent instead of flip in the West, Midwest and South.
Investors bidding at live events appear to be far more likely to flip the properties they purchase. Auction.com reports respondents indicating a preference toward flipping over holding to rent in every state where they conducted live events during the second quarter.
Conversely, responses given at online auctions in the second quarter of 2015 show that investors generally intend to hold the properties they purchase.
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