Should iBuyers Be Part of Your Investment Strategy?
May 1, 2022
By Robert Parsley
Real estate investment trends show that more and more people are turning to iBuyers to expedite the home selling process because this is a faster, simpler method of buying and selling real estate.
An iBuyer, or “instant buyer,” is a real estate company that uses algorithms and technology to buy and resell homes quickly. iBuyers purchase the home as-is without requesting any repairs, upgrades, warranties, closing costs or concessions, or real estate agent commissions—sometimes at a discounted price.
Selling to an iBuyer allows homeowners to sell their home without a broker or real estate agent, saving them time while avoiding the challenges and risks that can be incurred with the traditional real estate transactions. iBuyers have quickly moved from being on the horizon of real estate investing to now racing across the landscape. iBuyers bought more houses at higher prices in Q3 2021 than ever before, according to Zillow, nearly doubling the previous record in Q2 2021. Even in a seller’s market, consumers and real estate market conditions fueled the industry’s growth.
iBuying is another tool for investors to add to their toolbox. Real estate investors – especially single-family rental (SFR) real estate investors and fix and flip investors – can benefit from the iBuying trend in three major ways:
• Quickly finding available investment properties across the country.
• Opening doors to invest in different geographic areas.
• Buying properties “in bulk” with portfolio purchases.
Searching for Property Using iBuyers
In a perfect world, real estate investors would have enough time during the day to drive around and search for potential investment properties or fly from city to city to check out the latest listings. Many investors work with brokers and realtors to find potential investment properties, but even that only yields so much success. Others execute time-consuming strategies like cold calls, direct mail, and others.
The time management behind looking for investment properties has created a perfect situation for iBuyer companies to step up to the plate.
When an investor works with an iBuyer, they get the opportunity to browse the available listings on that iBuyer’s website, schedule times to “visit” multiple listings, and then notify the iBuying company which property listings they’re interested in. Investors don’t have to schedule an appointment, and they can view the property immediately after the listing is available. They can view homes on a whim at different times of the day – no matter where they are.
Purchasing investment properties through an iBuyer (like iBuyer.com, for example) opens the door for real estate investors to find and purchase properties across the country from any location. When the numbers pencil out to a profit, they create a major timesaver.
Where Are iBuyers Succeeding?
The iBuyer trend has caught on in some of the biggest cities in the country, and it has opened the door for investors to expand their portfolios.
Until recently, investors who wanted to buy a single-family home to rent out had limited options, as they were typically only able to consider properties within a reasonable driving distance that they could physically visit.
iBuying has been a game-changer in that area.
A recent report from Freddie Mac showed that the SFR market accounts for about 23 million rentals in the U.S. That’s a lot of opportunities for investors to jump into markets they aren’t currently in. Not only does iBuying open the door for investors to purchase multiple properties in different cities, but it also opens the door to “buy in bulk” by way of purchasing portfolios.
In recent years, changes to the real estate market and how SFRs are bought, sold, and managed have revolutionized how investments are done — and the scale at which properties are being bought and sold.
The current state of large-scale SFR investing has its roots in the post-recession years of 2008-2009. During these years, private equity firms spotted an opportunity with a large number of foreclosed houses on the market and began buying them up in bulk. Today, approximately $33 billion of SFR assets are owned by institutions, something that’s helped to firmly cement SFR properties as a long-term asset class.
This growth in investor demand has also helped to fuel the development of online platforms for buying and selling properties, making it easier than ever for investors to connect and transact with each other. Companies like Roofstock and SVN | SFRhub are paving the way in iBuying and creating a multitude of different opportunities for investors.
What Do iBuyers Mean for Investors?
iBuyers took a step back during the pandemic, but data shows they are diving back in. Despite low housing inventory nationwide, experts believe that the recent resurgence of iBuyers shouldn’t materially affect available housing inventory.
And that’s great news for investors because not only will they still have access to available inventory, but if they purchase properties through an iBuyer, they actually have greater access to more properties in more locations.
The bottom line with iBuyers is the same as the fundamental truths across the market—real estate investors with strong real estate investment strategies can still profit.
Robert Parsley is the Director of Business Development for Lima One Capital, the nation’s premier lender for real estate investors. Lima One finances borrowers who are building, improving, and stabilizing neighborhoods across the nation. For more information, visit limaone.com.
