In today’s increasingly data-driven world, real estate investors are searching in earnest for every competitive edge they can exploit. If you’re an investor whose livelihood depends on reaching motivated sellers before your competitors do, identifying absentee owners is one of the most important things you can do.
Absentee ownership is an often-overlooked indicator of a (potential) future real estate transaction. Many current and potential investors spend a significant amount of time trying to find the next up-and-coming metro, town, or neighborhood. Those are worthy pursuits, but disregarding one of the fundamental indications of a motivated seller can be a mistake in any investment strategy.
PropertyReach takes a look at how absentee ownership data can inform your next transaction and, ultimately, add a solid piece to your investment portfolio.
Absentee residential ownership refers to the arrangement in which the owner of a home does not consider that piece of property their primary residence. In many cases, absentee ownership indicates that the home is earning passive income for the owner.
Sometimes, though, an absentee owner has no intention of keeping the property and wants to offload in a timely manner. A situation like that offers a prime opportunity for calculated investors.
Broadly speaking, each absentee owner you’ll encounter during your search for a new portfolio property will fall into one of three buckets. Here are the distinct features of each type:
1. The institutional investor
Institutional investors are large firms with tons of properties, resources, and capital. Think Blackstone, American Homes 4 Rent, and Invitation Homes, the last of which owns around 86,000 single-family homes in the U.S.
They often oversee REITs (real estate investment trusts) and hire their own property management firms to maintain the homes in their portfolios. Each purchase is highly strategic and designed to provide long-term stability to the company.
2. The serious individual investor
Plenty of people whose primary jobs do not involve real estate management nonetheless create LLCs and partnerships to formalize professional ownership of their investment properties.
These investors don’t own many homes, but they devote enough time to property management that it makes sense to formalize ownership arrangements through separate business structures. The main reason for putting a house in an LLC or partnership is liability protection.
3. The true individual investor
These small-scope, mom-and-pop investors dominate the landscape of absentee homeownership, owning around 87% of investor-owned residences. Most of these investors own no more than five homes.
Plenty of individual investors obtain properties after a death in the family. They usually outsource property management to companies and don’t make a living from their rental properties.
Absentee owner data is simply a listing of homes whose owners’ primary addresses are elsewhere. It could be a handful of listings from a specific town or neighborhood you’re looking at, or it could refer to thousands of properties within a metropolitan statistical area. Listings of homes with absentee owners are highly coveted by real estate investors, and some will pay a handsome price to acquire them.
Depending on how much time and resources are available for you to compile these lists, you could find absentee owner data through:
Seeing that a home is under absentee ownership might lead you to discover that the owner is perfectly happy to rent it out for a small profit and is not interested in making any changes. Those circumstances probably mean you won’t be purchasing that home anytime soon.
Occasionally, though, there’s a lot going on under the surface that can indicate a less-than-ideal situation for the owner.
Few absentee owners are as emotionally invested in their rental properties as they are in their homesteads. Combine that with issues that commonly arise for landlords, such as difficult tenants, challenging legal landscapes, and rising costs of materials and labor, and there’s a decent chance a particular absentee owner could be looking for a way out.
Finding an absentee owner should be the start, and not the end, of your investigation into target properties. In other words, absentee ownership is not a strong enough indicator on its own that the owner is looking to sell.
Rather, you can combine absentee ownership with other signs of a (future) motivated seller. A few examples include:
A property with multiple signs of an impending sale is the ideal target for real estate investors; absentee ownership is just one piece of the puzzle.
An efficient data retrieval practice will form the bedrock of your real estate investment firm. Once you’ve defined the parameters for your property search, the next important step is to find out the best way to get data on absentee owners. Stacking indicators and scoring leads ensures you’re only going after properties worth your time.
This story was produced by PropertyReach and reviewed and distributed by Stacker.
Support Bristow Beat - Donate Today!