Comment by bruce511
3 days ago
I'll add one more data point to the thread;
The timing and pricing of investor selling is different to residents selling.
Residents sell (mostly) for reasons other than profit. They might be moving up, or moving away, or whatever. There's some pressure to "get it done" so they can move on. They can't really afford to "time" the market.
For investors there's much more "buy in the down, sell in the up". Except that it's been going up for a while, so there's no motivation to sell at all. It would be uncommon for them to accept a loss. Even unoccupied it's (mostly) better to hold rather than sell at a loss.
As mentioned elsewhere, overall market penetration by investors differs wildly by market, and segment. So 3% overall might sound low, but 20% of a dwelling type in a specific market is plenty to alter market forces.
I say this as someone who has owned property as an individual, and also worked in a business that invested in property.
> there's no motivation to sell at all
There's a huge motivation - the time value of money. And all the costs of having the house sit there not earning money.
An $800,000 house costs you $150/day in lost income.
Returns are better on the lower end of the market, and demand for rent there is higher. Which is why most residential investment is at the bottom end, not the top end.
In most markets I'm guessing an 800k house is at the higher end of the market.
That aside, housing portfolios always plan for a certain amount of unoccupied space. It's built into the model. (That's partly why small investors who own 1 or 2 properties get hit harder by this.)
Equally, even if the house is empty, there's usually some capital gain going on.
Investing in property is a long-term investment. The cost of buying, or selling is very high. So it's about getting quality units, in the right market space, and then leveraging that for a decade or more.
Yes there are lemons. And yes they'll get sold, perhaps at a loss. But being unoccupied for a bit doesn't make it a lemon, and being unoccupied won't necessarily trigger a sale.
Institutional investors are much more experienced and thus also a lot more likely to not buy lemons in the first place. Most "mom and dad with a second property" investors either inherited a place, kept an earlier property they lived in, or bought another property in their own neighborhood. They're typically gonna make some mistakes along the way.