Most rental property investors and owners are small landlords who own five or fewer single-family rental housing units, according to a new study.
The study showed that landlords and real estate investors lease 44 million rental households that house about 60 million people across the U.S., according to a release from Real Property Management. The study found this means there are about 10 million real estate investors representing 98 percent of all rental property owners and about 80 percent of all rental properties.
“The single-family residential investment market has long been misunderstood and dismissed as only an option for those wealthy enough to use real estate investing as a business,” Bob Pifke, CMO of Property Management Business Solutions, LLC, the franchisor of Real Property Management, said in the release.
“The results of this study have painted a clear picture that single-family residential investors are becoming more and more serious, and that rental properties are being recognized as a mainstream asset for investors building a portfolio for retirement,” he said.
Pike was referring to findings from The Iceberg Report, an annual report and analysis of the American single-family residential investment industry. Real Property Management was a primary sponsor of the study, which was created in partnership with 2020 REI.
“With the Iceberg Report, we now have a better understanding of this unique market including who they are, what they are interested in, how and when they buy properties, and the impact of their investment activity,” Pike said.
Rental property investors find property managers through referrals
In addition, the findings show that personal referrals from family, friends, and real estate agents were the primary means by which more than half of rental property investors found a property manager – contrary to what most believe is internet-driven research and validation.
There is an increasing level of sophistication amongst rental property investors and a higher level of financial acumen than previously thought, according to the study.
Single-family residences second only to apartments as rental housing
The Real Property Management organization, along with other sponsors, uncovered the following key information through the administration of this research study:
- Types of Structures of Renter Households. Out of the 43.7 million rental households, 15.2 million or 35 percent are single-family residences that represent 43 percent of rental residences. This segment of the rental industry is second only to apartment buildings.
- First vs. Subsequent Investment Opportunities. The first rental property investors purchase is typically found with the help of others. Real estate agents are the leading source, followed by friends and real estate investment clubs. Real estate investment courses also play a major role. In contrast, subsequent investment property purchases involve a much greater variety of inputs including personal contacts and internet sources. Investors quickly learn how to leverage multiple information sources to build their portfolios.
- Investor Location Preference. Two thirds of rental property investments are made in the investor’s local area and 52 percent occur in the investor’s city or town. The role of national investors who have no location preference remains a small segment of the market.
- Price for Residential Property. Most investors buy rental properties priced below both the average new or existing home price. Only one-third are willing to pay for housing above $275,000.
- Intent of Property Acquisition. Property investors play an important role in upgrading and improving housing. Two thirds of properties are renovated after purchase, and nearly half of all property investments are turned into rentals. Only a third of investors are “flippers”, who plan to sell the property as-is or with renovations.
- Property Management Preference. Doing it yourself and having a professional property manager is not a black and white decision for investors. Although half of investors handle all aspects of property management, 22 percent enlist the aid of a third party for some aspects of property management (primarily leasing vacancies), while 28 percent have a professional do all the property management work.
- Most Frequent Rental Problems. The number one problem for rental property investors is unexpected maintenance. Since most investors have full time careers outside of property investing, unexpected maintenance issues interfere with work and family activities. Secondly, one in four investors frequently deal with late or delinquent rent collection, and tenant damage to property is the third most frequently reported rental problem for investors.
The Iceberg Report is a new annual study designed to understand the behavior of the American single-family residential investment industry from Steve Murray of REAL Trends and Andrew Waite of NEXZUS Publishing Group, former publisher of Personal Real Estate Investor Magazine. The authors pioneered studying this market in 2007 when Murray, a real estate brokerage consultant, questioned Waite about the market impact of intentional investors on housing resales. At the time, investors were considered an irritant to traditional real estate agents, yet little had been done to quantify the amount of recurring business opportunity real estate investment offered the real estate sales industry. After years of industry expansion, and no subsequent industry wide surveys, polls, or reports being published, the 2020 REI Group commissioned the authors of the previous reports to embark on this new format. Adding a qualitative aspect to the proven quantitate approach was a key factor to the mission of the project.
To obtain the executive summary of the Iceberg Report, please visit https://www.propertymanagementfranchise.com/iceberg-report/.
About Real Property Management
Real Property Management is a franchise organization owned by Property Management Business Solutions, LLC, a privately held corporation based in Utah. With over 30 years of industry expertise, Real Property Management offices provide full-service residential property management for thousands of investors and rental home owners from more than 300 independently owned and operated locations throughout the United States and Canada. For more information about Real Property Management or property management services, please visit the following link: www.realpropertymgt.com. For information on franchising opportunities, please visit www.propertymanagementfranchise.com.