Baselane’s 2024 Investor Survey Unveils Optimism Amid Rising Expenses
Despite increasing costs, Baselane’s 2024 Real Estate Investor Survey highlights a positive outlook from investors. Key findings include:
81% of investors plan to expand their portfolios within the next two years.
Rather than worrying about vacancies, investors are focusing on financing costs (35%) and home prices (33%).
22% of respondents experienced rental insurance hikes of 11% or more, while 50% saw property tax increases exceeding 6%.
Conventional loans remain the most popular financing method (44%).
Investors Remain Optimistic, Even as Portfolios Expand
Contrary to popular belief, real estate investors are far from giving up. While there may be a slowdown in transactions, investor confidence remains strong. Over 81% of investors surveyed by Baselane plan to grow their portfolios within the next two years.
It’s clear from the survey that although investors are cautiously approaching new deals, their optimism is unwavering. Notably, 17% of investors feel satisfied with their current portfolios and have no plans to expand soon.
With rental demand holding steady, concerns about vacancies have subsided, as more than 52% of investors are less worried about this compared to 2023.
Affordability Challenges Take Center Stage
While tenant demand isn’t a problem, rising home prices and financing difficulties remain. According to the National Association of Realtors (NAR), the median home price in July 2024 surged 4.2% year-over-year to $422,600. The sharp rise in prices over the last four years is especially striking, given that most purchases were made when interest rates were below 3%.
Many sellers are holding on to their properties due to low pandemic-era mortgage rates, leaving potential buyers on the sidelines as they wait for interest rates to drop.
Data from the U.S. Census Bureau and the Department of Housing and Urban Development shows that housing starts for privately owned homes fell by 6.8% since June and 16% compared to July 2023.
Insurance and Taxes Present Significant Hurdles
Property owners have witnessed sharp rises in insurance premiums and taxes. Nearly 22% of investors reported rental property insurance increases of 11% or more, while 13% saw hikes of over 20%.
Taxes are climbing as well, with 50% of investors experiencing increases of more than 6%, and 18% reporting hikes of over 11%.
Conventional Loans Still Dominate Financing
When it comes to financing, 44% of investors favor conventional loans, which remain a reliable and familiar option. This financing method far outpaces alternatives like all-cash purchases, private loans, HELOCs, seller financing, and hard money loans.
Mortgage rates have eased somewhat, with the current rate at 6.2%, the lowest since February 2023. This is a significant decrease from the peak of 7.79% in 2023, with investors hoping for further declines.
Financing and Home Prices Remain Top Priorities
With mortgage rates expected to hover around 6% into next year, and the housing market unlikely to balance supply and demand until at least 2025, it’s no surprise that 35% of investors cite financing and 33% cite home prices as their primary concerns.
Adding to these concerns is the increasing activity of institutional investors, who are purchasing properties in bulk. In the first quarter of 2024, 18.7% of U.S. homes were sold to institutional buyers, marking the highest level in nearly two years. These homes were flipped for an average profit of 55.2%, up from 46.3% the previous year.
Meanwhile, the limited housing supply and escalating prices are driving up rental demand. Renting is now 27% cheaper than buying in the 50 largest metro areas, which opens opportunities for individual investors to capitalize on the demand and boost their returns.
Final Takeaways
While the increasing costs of acquiring and maintaining rental properties pose challenges, they also signal the real estate market’s resilience. As one investor aptly put it, “Real estate remains a solid investment—you just need to find the right property.”
Research Methodology
The Baselane survey was conducted online among U.S. landlords and real estate investors between June 18-26, 2024. The survey received responses from around 2,116 participants, ensuring a statistically significant sample size.
The objective was to gather insights on investment strategies, financing preferences, property ownership costs, and expectations for the real estate market’s future. The survey featured neutral questions with branching logic to display or hide questions based on prior responses. Sentiment was measured on a 1-5 scale, from “Strongly Disagree” to “Strongly Agree.”
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