Investors come in all flavors. A move-up investor, someone who is moving out of their personal residence but keeping it for an investment, casual investors who are looking for appreciation in a neighborhood, and score that higher than the cash flow realized, and performance investors who are driven by capitalization rates.
Having dealt extensively with all types, I cannot pinpoint a favorite, but I appreciate each for the challenges they present, and the challenges that the market delivers.
The move-up investor can be anywhere in the demographic, but they have the common trait of experience with home buying and a taste for building their real estate portfolio. Maybe they have found their significant other or added children, and they need a larger house, but want to keep their former owner-occupied property for their kids come college time... or maybe they are empty-nesters, scaling down but want to avoid a capital gains tax, or just want the income... just a few examples.
The casual investor is a buy-and-hold, usually with an emphasis on up and coming neighborhoods, or neighborhoods serviced by excellent schools, or occasionally, they have an affinity for new homes with little front end maintenance. This type of investor is usually willing to put a little elbow grease or pay a handyman for limited rehab: paint, flooring, fixtures, appliances, landscaping; things that enrich a home's appearance and value, but can be done without permitting and on a limited budget. Single family homes or condos, occasionally duplexes, but always an emphasis on neighborhood or proximity to something they have familiarity with.
The performance investor is easily who I have the most experience with. These purchases are almost always in the name of an LLC, involve fast cash transactions of 7-10 days, may involve 1031 exchanges, but more than anything else, are driven by the capitalization rate of the property- a measure of the rents versus the cost of acquisition. I can speak at length about what our market has done, how clients have performed, how properties are valued, insurance strategies, property management, exit strategies, etc. I have developed an easy to read spread sheet that makes deciding between which properties to purchase an easy choice.
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