The Austin real estate market has been heating, and it’s only getting hotter. On CNBC.com’s Realty Check, real estate reporter Diana Olick writes, “It’s no secret that investors have been inhaling foreclosed properties at a breakneck pace, trying to cash in on an increasingly hot rental market.”
Recently Bloomberg reported that Blackstone Group, the biggest buyer of U.S. commercial real estate, “is turning to residential real estate after a 34 percent plunge in prices since the 2006 peak. The New York-based company is the biggest investor seeking to enter the single-family leasing market as rents climb and the U.S. homeownership rate sits at a 15-year low.”
So who are the buyers making up this heat wave of investing? Surprisingly, the typical real estate investor isn’t wealthy and middle-aged like you might imagine. The reality is that the median income of the real estate investor is $86,100. It’s not much higher than the median income of the primary residence buyer: $72,400. And nearly 40% of investors made less than $75,000 in 2011. Today’s real estate investor is really just the average American homebuyer.
When you consider today’s market conditions, it’s not surprising that investors are popping up everywhere. But not all discounted properties are good investments, no matter how low the price and interest rate may be. Several factors affect a property’s return on investment, and they all need to be carefully considered. For example, experienced investors know to invest for cash flow—a property’s return on investment in the form of monthly rent. It’s immediate, steady, and can build wealth over time. Many new investors tend to think in terms of appreciation, but intelligent investors know that investing for cash flow helps ensure a profitable investment regardless of appreciation.