The majority of investors who bought homes at auction last month intend to hold onto them as a source of rental income, according to a report from real estate marketplace Auction.com.
Out of all the investors surveyed by the company in November, 50.5 percent said they're going to rent out their properties, while 46.6 percent plan to flip them to another buyer. The preference toward renting was more evident among one-time purchasers, 72.2 percent of whom said they plan to rent out the auctioned home (compared to 50.4 percent of respondents who identified as full-time "real estate investors" and 36.8 percent of those working on behalf of another investor).
Isolating online buyers, Auction.com found a preference in the group toward renting rather than flipping, though responses differed by region: Renting was easily was preferred choice for properties in the Midwest and South, barely edged out flipping in the West, and was less popular than flipping in the Northeast.
While online buyers showed a leaning toward renting, investors bidding at live events were more interested in flipping the properties, with that strategy being the clear choice in the majority of markets where Auction.com is active. Only Texas, Tennessee, and Georgia bucked that trend.
"Real estate investors appear more likely to flip a property in those regions where home values are higher," said Rick Sharga, EVP at Auction.com. "Higher prices can translate to a faster and potentially more significant short-term return on investment. The hold and rent strategy seems most popular in markets where home prices are lower, allowing investors to charge a more competitive monthly rental rate and still produce reasonable returns over an extended period of time."
Flipping was also the strategy of choice among investors purchasing multiple properties per year, being favored by 52.8 percent of smaller-scale investors bidding online and 60 percent of institutional investors (those who buy 50 or more homes annually).
For live event bidders, there was slightly more room for the rental crowd, though flipping was still the more popular choice, preferred by 49.8 percent of smaller firms and 55.4 percent of institutional investors.