Local Investors Drive Record Demand for Foreclosures
Auction.com, Irvine, Calif., reported more than three out of four distressed property buyers are local investors and nearly nine in 10 purchased five or fewer investment properties in 2020.
The firm’s 2021 Buyer Insights Report also found that rehabbing and reselling to owner-occupants was the primary investing strategy for most buyers (57 percent), while 38 percent of buyers said their primary investing strategy involved acquiring investment property as rentals. Among those rental investors, 62 percent said that they have rented back to current occupants of occupied homes.
“A transparent and democratized distressed property marketplace attracts a diverse set of mostly local real estate investors,” said Jason Allnutt, Auction.com CEO. “Not surprisingly, these local buyers are the best option for responsibly returning distressed properties to retail buyers and renters.”
Allnutt noted 62 percent of buyers on the Auction.com platform reported they successfully avoided an eviction by keeping the occupants in the homes as renters.
More than two-thirds of buyers budget at least 20 percent of a property’s purchase price for rehab and holding costs, while more than one-third budget at least 30 percent of a property’s purchase price for rehab and holding costs, the report said. That equates to a budget of between $27,000 and $40,000 per property based on the average sales price of homes sold on Auction.com last year.
Other report findings:
–Building long-term wealth and creating new income sources were the top investing motivations for most buyers, but a combined 13 percent of buyers ranked improving homes and neighborhoods or investing back into the community as their top motivation for investing.
–Nearly three-quarters of buyers believe home prices in their local market will rise at least 3 percent this year, but 40 percent described their local market as “overvalued with a correction possible.”
–Nearly all buyers–93 percent–said they expect their 2021 acquisitions to increase or remain the same as their 2020 acquisitions.
