Auction.com, LLC, an online real estate marketplace, announced the findings from its April 2015 Real Estate Investor Activity Report, a nationwide survey of real estate investors bidding on properties offered for auction during the period. Though survey data collected from investors bidding on property online and at live events across the country in April reveals continued interest in flipping over a hold-to-rent strategy, that preference may be lessening.
“Most of the country and most investor segments performed in a manner very consistent with what we’ve seen over the past year, but investment strategies in Texas appear to have shifted pretty dramatically,” Auction.com Executive Vice President Rick Sharga said. “Investors probably realize that without oil fueling Texas’ growth, it’s unlikely that home prices will continue to appreciate rapidly, and it’s very likely that home purchase demand will weaken. Given those considerations, a buy-and-hold strategy may suddenly be much more attractive.”
Auction.com’s findings for April favor flipping overall, but investor intent varies considerably by the type of auction (live event versus online auction) and the investor profile. Survey respondents who indicated that they were making a one-time purchase preferred a hold-to-rent strategy, while respondents identifying themselves as full-time “real estate investors” and those indicating that they were working on behalf of another investor favored flipping.
Investor Intent
Investor Profile
|
Flip
|
Rent
|
Undecided
|
One-time purchase
|
23.8%
|
74.3%
|
1.9%
|
Real Estate Investor
|
52.4%
|
47%
|
0.6%
|
Working on Behalf of Another Investor
|
66.3%
|
29.5%
|
4.2%
|
TOTAL
|
50.4%
|
48.3%
|
1.3%
|
Investors bidding at live events appear to be more likely to flip the properties they purchase based on survey responses collected in April, with respondents indicating a strong preference toward flipping over holding to rent in nearly every state where Auction.com conducted live events, with the exception of Texas, where lower oil prices have resulted in fewer energy-related jobs in four of the past five months.
“It will be interesting to see if this trend spreads to other states where energy-related jobs have generated economic gains, or whether we’ll begin to see a boom in home purchases stimulated by these lower energy prices across the country,” Sharga said.
Conversely, responses given at online auctions in April continued to show that investors bidding online are more likely to hold the properties they purchase – except in the West, where the pendulum has swung toward flipping. This shift, while slight, is likely because the region’s higher purchase prices are negatively impacting rental property returns.
As noted in previous months, investors indicating that they purchase one or fewer properties per year continued to favor a hold-to-rent strategy, while flipping remained the preference among more active investors.