2015 Investor Survey

THE IMPACT OF INVESTORS ON CAS
HOUSING MARKET
Presented by
Carmen Hirciag, MBA
Senior Research Analyst
Survey Methodology
379 online surveys conducted in February-March 2015
Respondents: REALTORS who have worked with investors in
past 12 months (February/March 2014 February/March 2015)
REALTORS GENERAL
INVESTOR BUSINESS
Investor Market Overview
More REALTOR Respondents HaveWorkedWith

Investor Buyers During the PastYear
50%
45%
40%
35%
30%
25%
20%
15%
10%
5%
0%
47%
41%
34%
2013
2014
2015
Number ofTransactions Declining

Average Investor Transactions
7
6.4
4.9
4.0
4
# of
Transactions 3
2
1
0
2013
2014
Q: How many investor transactions did you close in the past 12 months?
2015
InvestorsAccount for 26% of Business

Average
15.2
Number of Transactions
16.0
14.0
12.0
Total Closed Transactions
10.0
Investor Transactions
8.0
6.0
4.0
4.0
2.0
0.0
Q: How many transactions did you close in the past 12 months?
Investor Business Declining

45%
40%
39%
35%
32%
30%
26%
25%
20%
15%
10%
5%
0%
2013
2014
Q: How many total transactions did you close in the past 12 months?
2015
Number of InvestorClients Stable

Average
#
7
o
6
f
5
C
4
l
i 3
e
2
n
t 1
s
0
5.2
2013
Q: How many investor clients do you currently have?
2014
5.4
2015
1/3 REALTORS Have BeenContacted by Previous

Clients Ready to Sell
Yes 34%
No 66%
Q: Have you been contacted by any previous investment buyers who will be ready to sell in the near future?
LAST INVESTOR BUYER

TRANSACTION
Buyers Dominate InvestmentTransactions

100%
90%
80%
70%
21%
24%
11%
35%
Both
60%
Sellers
50%
40%
30%
Buyers
56%
54%
20%
10%
0%
2014
Q: Who did you represent?
2015
MoreTransactionsConducted in SouthernCA
100%
1%
0.4%
40%
46%
90%
80%
70%
50%
60%
Another State
50%
Southern CA
40%
30%
27%
45%
30%
20%
10%
23%
15%
24%
0%
2013
2014
Q: Where was the property located in your last investor transaction?
2015
Other CA
Northern CA
Nearly Properties in Suburban Location

Other 1.5%
Rural 13%
Suburban 46%
Urban/city
center 40%
Q: How would you describe the location of the property purchased?
Multifamily Purchases Increasing

90%
80%
78%
73% 72%
70%
60%
50%
2013
2014
40%
2015
30%
19% 21%
20%
14%
7.2% 6.7% 7.0%
10%
1.1% 0.9%0.9%
0%
Single family home
Multifamily
Q: What type of property did your investor client purchase?
Bulk sale
Other
Slightly More Property Units PerTransaction

Average
# of Units
4.0
3.8
3.5
4.0
3.0
2.0
1.0
0.0
2013
2014
Q: How many units did the property have in your last investor transaction?
2015
MajorityTransactions Not Distressed

100%
90%
80%
18%
7%
13%
12%
70%
Short sale
60%
Foreclosure
50%
40%
70%
80%
30%
20%
10%
0%
2014
Q: Was the property a(n)?
2015
Equity
Initial Listing PriceGrowing

Median List Price
$381,500
$400,000
$350,000
$307,500
$322,500
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2013
Q: What was the initial listing price?
2014
2015
Final Sale PriceGrowing

Median Sale Price
$375,000
$400,000
$350,000
$292,000
$320,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
2013
Q: What was the final sale price?
2014
2015
Listing Price 1.7% > Sale Price

Median
$381,500
$375,000
$400,000
$350,000
$300,000
$250,000
$200,000
$150,000
$100,000
$50,000
$0
Listing
Sale
TransactionCost Rising
Median Cost
$15,000
$16,000
$12,000
$14,000
$12,000
$9,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2013
Q: How much did it cost to purchase the property?
2014
2015
Most Investors Made Minor or No Repairs

None
100%
80%
Minor cosmetic
9%
22%
60%
40%
20%
51%
18%
0%
2013
Major cosmetic
Major remodeling
17%
12%
22%
18%
39%
39%
22%
30%
2014
Q: What type of rehabilitation/remodeling was done to the property?
2015
Median RemodelingCost Declined

$15,000
$16,000
$14,000
$12,000
$10,000
$10,000
$10,000
$8,000
$6,000
$4,000
$2,000
$0
2013
2014
Q: How much did your client invest in rehabilitating/remodeling the property?
2015
InvestmentCost is 7% of Sale Price

Transaction cost
$15,000 (4%)
Rehabilitation
Cost $10,000
(3%)
Purchase Price
$375,000
Expected Rate of Return Down

19%
Average
17%
20%
18%
16%
13%
14%
12%
10%
8%
6%
4%
2%
0%
2013
2014
Q: What is the expected rate of return on the property investment?
2015
Majority Investors Rented Properties

100%
90%
80%
7%
14%
20%
28%
70%
9.7%
26%
60%
Other
50%
40%
30%
Flip
73%
58%
65%
20%
10%
0%
2013
Q: What was the intended use of the property?
2014
2015
Rental
Top Reasons for Buying Now

good price
39%
location
38%
Future development potential
8.8%
Other
6.9%
Size
6.9%
0%
5% 10% 15% 20% 25% 30% 35% 40% 45%
Q: What motivated your client to buy now? (multiple response)
InvestorsOwn Fewer Properties

% who own other properties
9.0
P
r
o
# p
e
o r
f t
i
e
s
8.0
7.0
90%
Average # of other properties

100%
8.3
83%
6.5
83%
90%
6.4
80%
6.0
70%
1.0
W O
60% h t
50% o h
e
40%
30% O r
20% w
n
10%
0.0
0%
5.0
4.0
3.0
2.0
2013
2014
Q: How many other investment properties does your client own?
2015
P
r
o
p
e
r
t
i
e
s
2/5Other Investments Located inCentral &Other

Parts ofCA
Other CA
Southern CA
Northern CA
60%
50%
40%
50%
44%
30%
29%
20%
21%
41%
42%
33%
20%
21%
10%
0%
2013
Q: Where are those properties located?
2014
2015
average: 1.8
47% investors purchased other

properties within past year
# other properties
purchased within
past year
Minimum: 0
Maximum: 30
Q: How many other properties did your last investor client purchase within the past 12 months?
65% of PropertiesWere Found on MLS

MLS
65%
15%
My listing
Directly from seller
5.8%
Client found property
5.2%
2.6%
Another agent's private listing
5.2%
Other
0%
Q: How did you find the property for your client?
20%
40%
60%
80%
Future Price Predictions Positive

120.0%
100.0%
5%
13%
80.0%
Don't know
60.0%
70%
Up
75%
40.0%
20.0%
0.0%
25%
0.6%
In 1 year
Flat
Down
10%
1.9%
In 5 years
Q: Do you think real estate prices in the neighborhood where the property is located will go up, down or stay
flat?
Intended Length of Ownership Declined

AverageYears
9
7.9
# 8
8.0
6.1
o
6
f
5
Y
e
a
r
s
4
3
2
1
0
2013
2014
Q: How many years does your client intend to keep the property?
2015
2/3 Properties Managed by Owner

100%
90%
80%
8%
11%
10%
27%
22%
24%
70%
60%
Other
50%
Property manager
40%
30%
67%
69%
66%
2013
2014
2015
20%
10%
0%
Q: Who will manage the property?
Owner
19% of Investors Didnt HaveAny Concerns

Profitability (11%)
Closing (8.2%)
Renovation/repair costs, price (7.2%)
1031 exchange, future value (5.2%)
Finding tenant, property condition, financing (4.1%)
Q: What were your clients biggest concerns during the transaction?
Investors Finding Property as Fast as LastYear

Average
12.0
# of Weeks
10.0
9.9
8.0
6.8
7.0
2014
2015
6.0
4.0
2.0
0.0
2013
Q: How many weeks did you spend looking for a property with your client?
InvestorsViewed More Properties

Average
12.0
11.1
# of Properties
10.0
8.7
8.0
6.9
6.0
4.0
2.0
0.0
2013
2014
Q: How many properties did you view with your client prior to the client making a purchase?
2015
Fewer MultipleOffers
% Multiple Offers
4.2
90%
4.0
80%
3.5
70%
2.7
3.0
2.5
2.0
60%
2.0
79%
63%
1.5
1.0
54%
50%
40%
30%
20%
0.5
10%
0.0
0%
2013
2014
Q: How many offers did your client make on other properties?
2015
% Multiple Offers
# of Offers
4.5
Average # of Offers
Sellers Received 3.3 Offers on Average

Average
3.5
3.3
3.3
2014
2015
3.0
# of Offers
2.5
2.0
1.5
1.0
0.5
0.0
Q: How many offers did the property purchased by your last investor client receive, including that of your
buyer?
FINANCING
Majority InvestorsContinue Paying Cash

100%
90%
80%
33%
33%
34%
70%
60%
50%
Financing
40%
Cash
30%
67%
67%
66%
2013
2014
2015
20%
10%
0%
Q: How did your client pay for the property?
Most Cash Funds from Previous Investment

Proceeds from previous investment
49%
Personal savings
42%
20%
Private investors
0%
10%
20%
Q: What was the source of the cash funds in your last investor transaction?
30%
40%
50%
Majority Financing from Bank

75%
Bank loan
23%
Private investors
1031 exchange
Other
6.3%
4.2%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Q: What was the source of the financing in your last investor transaction?
CLIENT AGENT
RELATIONSHIP
Many REALTORSGetting Repeat Business

36%
Previous client
17%
Refferal
Client found me online
11%
Friend
11%
7.5%
Other
5.5%
Relative
Prior dealings with my brokerage
4.1%
"For Sale" sign
4.1%
3.4%
Client responded to my ad
0%
5% 10% 15% 20% 25% 30% 35% 40%
Q: How did you establish a relationship with your last investor client?
GreatestChallenges inWorking w/Investors

27%
Finding the right property

10%
ROI
Transaction terms
5%
Price
5%
3%
Transaction costs
0%
5%
10%
Q: What was your greatest challenge in working with an investor buyer?
15%
20%
25%
30%
Biggest Difference inWorking w/Investors

27%
Profit driven
21%
Less emotional
7.3%
More knowledgeable
Less picky
4.9%
Easier transaction
4.9%
Faster decision
3.7%
Calculating ROI
3.7%
2.4%
Financing
0%
5%
10%
15%
20%
25%
Q: What is the biggest difference in working with investor clients compared to residential clients?
30%
55% Investors DidntAnalyze Return Potential

6.6%
Comps/CMA
3.7%
Cap rate
0.7%
GRM
0%
1%
2%
3%
4%
5%
6%
7%
Q: How did you and your client analyze the investment return potential of the property the client purchased?
Most Essential Info to Investors

Location
23%
ROI
15%
Price
15%
15%
Comps
Other
13%
Market rent
10%
Property condition
5.6%
Rental restrictions
2.8%
0%
5%
10%
15%
20%
Q: What information was essential to your client in his/her decision to purchase that particular property?
25%
Marketing to Attract Investors

Print 2%
Other 18%
None 46%
Online 34%
Q: What kind of marketing do you do to attract investor clients? Please select all that apply.
INVESTOR DEMOGRAPHICS
Most Investors are Individuals

80%
72%
70%
60%
50%
40%
30%
22%
20%
10%
2.3%
0%
Individual
Q: Was your client a(n)?
LLC
Corp
0.8%
LLP
3%
Other
Over Half of Individual Investors areWhite

Caucasian/White
55%
Asian
19%
Hispanic/Latino
13%
Other
9.5%
3.6%
African American/Black
0%
10%
Q: How would you describe your clients ethnic background?
20%
30%
40%
50%
60%
More Minority Investors in 2015

120.0%
100.0%
80.0%
49%
60%
55%
60.0%
40.0%
20.0%
0.0%
Caucasian/White
Asian
Hispanic/Latino
Other
29%
17%
14%
11%
7.9%
9.7%
2013
2014
Q: How would you describe your clients ethnic background?
19%
13%
2015
African American/Black
5% Foreign Investors
Foreigner 5%
U.S.A. 95%
Q: What is your clients country of permanent residence?
Annual Income/Revenue 25% Lower

Median
$200,000
$200,000
$160,000
$150,000
$150,000
$100,000
$50,000
$0
2013
Q: What is your clients annual income/revenue?
2014
2015
RECAP
Investor Market Shrinking
The Bright Side
The Bright Side
Investors are Good Clients

Pay cash
Less emotional
Less picky
More affluent
Need property
managers
Own other
properties
More
knowledgeable
Join us for our next webinar
Understanding California Home

Sellers
Thursday, April 30, 2014
2:00 PM 2:30 PM
To register:
WWW.CAR.ORG/MARKETDATA/VIDEOS
Stay connected with Research

CARResearchGroup
CARResearchInfo
On.car.org/CARResearch
Housingmatters.car.org
QUESTIONS?
carmenh@car.org

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THE IMPACT OF INVESTORS ON CAS

More REALTOR Respondents HaveWorkedWith

Number ofTransactions Declining

InvestorsAccount for 26% of Business

Total Closed Transactions

Investor Business Declining

Number of InvestorClients Stable

1/3 REALTORS Have BeenContacted by Previous

LAST INVESTOR BUYER

Buyers Dominate InvestmentTransactions

Q: Where was the property located in your last investor transaction?

Nearly Properties in Suburban Location

Q: How would you describe the location of the property purchased?

Multifamily Purchases Increasing

Q: What type of property did your investor client purchase?

Slightly More Property Units PerTransaction

MajorityTransactions Not Distressed

Initial Listing PriceGrowing

Final Sale PriceGrowing

Listing Price 1.7% > Sale Price

Most Investors Made Minor or No Repairs

Q: What type of rehabilitation/remodeling was done to the property?

Median RemodelingCost Declined

Q: How much did your client invest in rehabilitating/remodeling the property?

InvestmentCost is 7% of Sale Price

Expected Rate of Return Down

Q: What is the expected rate of return on the property investment?

Majority Investors Rented Properties

Top Reasons for Buying Now

Future development potential

5% 10% 15% 20% 25% 30% 35% 40% 45%

Q: What motivated your client to buy now? (multiple response)

InvestorsOwn Fewer Properties

Average # of other properties

Q: How many other investment properties does your client own?

2/5Other Investments Located inCentral &Other

47% investors purchased other

65% of PropertiesWere Found on MLS

Client found property

Another agent's private listing

Q: How did you find the property for your client?

Future Price Predictions Positive

Intended Length of Ownership Declined

2/3 Properties Managed by Owner

Q: Who will manage the property?

19% of Investors Didnt HaveAny Concerns

Q: What were your clients biggest concerns during the transaction?

Investors Finding Property as Fast as LastYear

InvestorsViewed More Properties

Q: How many offers did your client make on other properties?

Sellers Received 3.3 Offers on Average

Majority InvestorsContinue Paying Cash

Q: How did your client pay for the property?

Most Cash Funds from Previous Investment

Majority Financing from Bank

0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0% 70.0% 80.0%

Many REALTORSGetting Repeat Business

"For Sale" sign

5% 10% 15% 20% 25% 30% 35% 40%

GreatestChallenges inWorking w/Investors

Finding the right property

Q: What was your greatest challenge in working with an investor buyer?

Biggest Difference inWorking w/Investors

55% Investors DidntAnalyze Return Potential