Home investors sometimes get a bad rap from the public. Like every industry, a few bad apples can spoil the bunch. Working with a home investor does not have to be a negative experience. Let’s bust some common misconceptions about home investors I deal with all the time when working with buyers and sellers.
1) Home investors profit from sellers who have a lack of knowledge or understanding of the real estate market.
Yes, home investors are in business to make a profit, but often we’re not expecting to make more than a few thousand dollars on rehabbing a property. We offer prices that we feel are fair based on market value and the home’s condition. Home investors do their research to know the neighborhood comparables. We know, either from discussions with repair contractors or experience, approximately how much certain repairs will cost to make a home safe and attractive for future occupants. We figure in these numbers when making an offer.
Most home investors will happily explain the reason behind their offer. We are not in business to profit from sellers that don’t understand real estate.
2) Home investors are all “get rich quick” people that are just looking for the latest trend to make money.
There’s nothing “get rich quick” about home investing. In fact, right now home investing is harder because the real estate market is rebounding. Fewer distressed properties are coming on the market and average sale prices are rising. To find a profitable property requires lots of time, research, negotiation and smart management.
Once a property is acquired it could take weeks or months to renovate. That property might sit on the market for weeks or months after that. It’s completely possible to lose money on a remodeled property because it sits on the market while the investor is continuing to pay on the loan for that property.
The idea that home investing and rehabbing is guaranteed to make a huge profit is a common myth that leads people to jump into the industry with no idea what they are doing.
3) Home investors take advantage of people’s housing problems for their financial gain.
Home investors are sensitive to why people are selling their properties. We know sometimes it’s because of a tough financial situation. We’ve worked with people that have lost their jobs or are facing significant medical issues. Sometimes we help people who inherited properties from loved ones that are deceased. Home ownership has become a burden.
If I can help someone by relieving the stress of paying for a mortgage they cannot afford, that’s a good thing. We still intend to give what we see is a fair offer, again based on researching fair market value and the property’s condition.
4) Home investors all have a slumlord mentality, keeping every penny for themselves while families in their properties live in unsafe conditions.
This common misconception about home investors doesn’t make sense. Private investors and companies that purchase properties, renovate, and lease them, are held to the same laws that govern any landlord-tenant relationship.
As the property owner, it is our responsibility to make sure the living conditions are safe or we will be held accountable. If the tenant feels they are living in unsafe conditions and the landlord is not responsive to fixing the issue, they can pursue appropriate legal action.
Most home investors leasing properties want their tenants to be happy and stay in the property. It’s more of a hassle for us to remarket the home and find a new tenant than retain the ones already there.
5) ALL rehabbers do the cheapest, lowest quality improvements to their homes in order to make the most money possible.
While home investors are not likely to install marble countertops in an average family home, most home investors want durable materials in the properties that they are going to lease or sell. Durable is not always cheap and definitely not low quality. We understand when we’re selling properties that the buyers want materials that will hold up to life’s demands. We’re trying to appeal to those people and are unlikely to install unsatisfactory products.
The same is especially true of leasing a property. Rentals see a lot of wear and tear and the more we must fix things, the more we lose money on the property. We’d rather do it right the first time than continue spending hundreds to replace flooring, fix kitchens, or repair poor plumbing.
Now that we’ve busted these common misconceptions about home investors, you can see we are truly motivated to providing safe, quality housing. Home investors are truly investors for a reason: we pour a lot of thought, time, and money into each property we acquire.