Results of our first real estate investor survey

We would like to thank all those who took a few minutes to respond to the first of our investor surveys; and we’d like to share the results:

Q1: What type of real estate investment property do you buy, or plan to buy? Check all that apply.

Multifamily, 2-5 units 52%
Apartment Building, >5 units 54%
Mixed-Use 20%
Retail Strip Center 26%
Retail, Larger Shopping Center 9%
Free-Standing NNN 4%
Office Building 30%
Self-Storage 24%
Industrial 7%
Hotel 9%
Other (please specify)
    Single-family 22%
    Land 2%

Keep in mind that we asked respondents to “check all that apply,” so that is why these don’t–and shouldn’t– add up to 100%.  The results show that many investors buy more than one type of property.

Clearly, residential property was more popular than commercial, and what may have been a bit surprising to us was the number of “write-in” votes for single-family.  Combining these with the 2-5 unit multifamilies, it would appear that many investors are currently leaning toward smaller residential–at least among our pool of survey-takers. This may be a reflection of the inventory of homes that ended up in foreclosure, and could perhaps be purchased at prices that woulf make them attractive to investors.

Q2: Thinking about your cash flow projections for your potential investment, why do you make those projections? Check all that apply.

To decide if I believe the property is worth considering. 87%
To help me to decide on an appropriate offer price (or selling price). 78%
To show to a lender in support of my request for financing. 61%
To show to a potential equity partner. 48%
I don’t make cash flow projections. 7%

We’re certainly not surprised to see that the great majority of  investors want to vet their deals and scrutinize the pricing by performing a cash flow analysis; and also that a good pro forma can bring you some credibility when dealing with a lender.

We find it very interesting that almost half of our respondents said they use a cash flow projection to show to a potential equity partner. That would certainly seem to suggest that a lot of investors are pooling their resources in order to do deals. Just anecdotally, we believe we’ve seen a lot more investment partnerships since the 2008 meltdown, probably because of the difficulty that many have encountered finding financing.

One general note: Before the statisticians in the audience take us to task, we should impose a caution in regard to interpreting these survey results. A truly scientific study would have avoided what is called “self-selection,” where responses come strictly from those who are willing to volunteer their point of view.

Nonetheless, we believe this simple and informal survey offers a fairly good window into investor thinking.

We would be very interested in hearing your take on these survey results. We hope you’ll send us your comments.

And finally, we didn’t forget about that bonus:  We promised to give away three signed copies of What Every Real Estate Investor Needs to Know About Cash Flow… , and that’s up next.  This week we’ll pick three email addresses from among those who opted-in to the drawing and contact them so we can send them their copies.  If you participated, please keep an eye out for that email from us.

 

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