[quote=bearishgurl][quote=livinincali] . . . The fear of inflation and search for yield are significant driving factors in today’s market. There’s plenty of people hiding out in real estate as a safe haven that would probably rather be invested in something else. I honestly think investor speculators looking for yield are probably much weaker hands than traditional owner occupiers. It will be the perfect storm when rates rise. Not only will mortgage rates go up but at the same time those that were looking for yield are going to try to exit.[/quote]
livinincali, I disagree that free-and-clear RE owners are “weaker hands.”
It doesn’t matter that these “investors” were/are seeking yield. If it is not a good time to sell, they don’t have to. If rates go up, they can continue to rent their propertie(s) out in lieu of investing in something more passive. I just don’t see CD’s, MM funds and bond yields going so high as to rival rental income from an investment property purchased right and with all cash.
“Traditional owner occupiers” didn’t buy to “make the numbers work.” They bought what they liked where they personally wanted to live (within the confines of their qualifications).[/quote]
I agree with BG on this point regarding cash buyers. I have a lot of experience dealing with cash buyers. I’ve purchased literally hundreds and hundreds of properties for investors in the past decade (all 100% cash). I’m speaking about hundreds of millions of dollars worth of properties.
These people are NOT “weak hands” for the most part. As BG correctly mentioned, they can ride out any ups OR downs. They aren’t forced to sell. The only few exceptions I’ve seen are people that had major life events that are not in the norm (i.e. finding out they are going to die and want to liquidate to make it easier on their family, major medical illness of them or a spouse/kid/etc, major loss from some uncommon event like their house or business burned down). And out of over 500+ people it’s only been probably 10 that I’ve known that were “forced to sell”.
But these things are VERY rare. Cash buyers are typically the total opposite of “weak hands” that would be forced to sell if prices dipped.
I agree with the various distinctions mentioned of “hedge fund, private equity fund, venture capital, etc”. Many of these funds ARE buying and much of it isn’t leveraged at all.
Also, it’s almost impossible to figure out what % is owner occupied vs. rentals in many cases. Many investors hire third parties to assist them purchase and the properties are put in the buyer’s own name most of the times. You’d think that if you were buying in cash you’d always use an LLC but many people don’t bother with this.
I own several properties in 5 different countries and some of them have had turmoil, high inflation, corrupt leaders and politicians, ups and downs but as a cash buyer I don’t care what happens locally and not having a mortgage I could care less what the “sales value” is. I just ride out any ups and downs and rent it out. Sure, cash flow can be reduced at times but no need to be “forced to sell” being a cash buyer.
I avoid all the “noise” mentioned above and just try to buy in the best areas and typically there is ALWAYS some demand for rentals. My main goal is cash flow not capital appreciation. (sure it’s nice and icing on the cake but that isn’t my goal) and probably it can be said of many cash buyers.
