What’s in a name? In the years since the historic housing collapse of 2008, “real estate investors” have been alternately blamed and praised for their contributions to the emerging recovery from that mortgage meltdown. But investors can range from major investment companies to individual entrepreneurs, with stops along the way for investment groups and clubs – all with their own impact on both the investing process and the market.
Vilified by homeowners, activists and even small, solo investors with mortgaged income properties, large investment companies can play the heavyweight in some areas of the housing market. Frequently backed by foreign funds, these entities may rely on cash transactions to snap up large numbers of commercial and residential properties in markets around the country Some housing transactions actively favor this kind of investor: when Fannie Mae diverted itself of foreclosed homes in bulk sales, investment companies were invited to bid, but individual investors were shut out of the process.
This type of investor is alternately blamed for urban blight and the destruction of neighborhoods, and praised as a provider of much needed rental housing. With day-to-day affairs handled by property management companies, these faceless entities seem cold and indifferent to many 00 including the independent investors who lose investment opportunities to them.
On the other end of the scale, the solo investor who finances properties with mortgages as an entrepreneur may still use a property manager, but remains in sole control of the endeavor, with all the pluses and minuses that come along. Forced to compete in high-demand markets with investment companies, independent investors, like residential buyers, find themselves shut out of some markets or housing deals geared toward the high-volume companies.
Private investing clubs and groups for independent investors attempt to offer safety in numbers: spread the risk, share the wealth. Some groups focus on offering investing advice, while others exist to make investments that individual members might not e able to make alone. Groups can get discounts and perks that solo investors often can’t, including better interest rates. But investing decisions are made collectively and involve compromises, robbing the solo investor of the freedom to make all the decisions.
Whether grouped together for power in members, going solo or conducting business from offices abroad, real estate investors keep foreclosed homes from falling into ruin, provide housing for the growing pool of US renters, and keep housing surpluses low. Investors play an active and varied role in both the housing collapse and its resurrection –a role that’s often misunderstood by those who assume that all income property investors are the same.
The Jason Hartman Team