Over the last two years, the residential real estate market has been on fire, with record home sale prices and sellers getting thousands of dollars over the asking price – at least until inflation hit an all-time high and mortgage rates began to climb. Many of the buyers of single-family homes, particularly at the lower end of the market, are property companies and investors who are turning them into rental properties or flipping them to sell to new buyers.
Real estate investors, according to the realty company Redfin, purchased a record 18.4% (one in seven) of the homes that were sold in the United States in the fourth quarter of 2021, up from 12.6% the previous year. In the more affordable Sun Belt metro areas, the percentage is much higher.
Real estate investors include large corporations, small businesses, or wealthy individuals who do not live in the properties they purchase, according to The Washington Post.
Proponents Say Property Investors Are Meeting a Demand for Rental Homes
David Howard, executive director of the National Rental Home Council, which represents the single-family rental home industry, in an article in The New York Times, said that “demand for rental homes is high and companies are coming in and trying to satisfy that demand.” He also added that property investors and companies are addressing the supply shortage by building new rental home communities from scratch.
Not Everyone Is Happy About the Amount of Investor Homes Being Purchased
On the other hand, some residents are not happy about the influx of property investors in their communities, fearing that first-time home buyers will have even more of a difficult time purchasing a house. Also, many fear rents will be become prohibitively high. Studies show that corporate landlords are more likely than small property owners to raise rents.
To stem investor purchases of homes, some homeowners associations are placing caps on the number of homes that can be rented in a particular neighborhood or requiring that potential tenants be vetted by an association board.
Our Investor Property Program
ISC offers an Investor Property Program (IPP) designed for real estate investors who own multiple properties. Eligible properties include rental dwellings for one to eight families, vacant dwellings, condo rentals, risks under renovation, and short-term vacation rentals. We can insure multiple properties on a master policy (minimum limit is five), with a Total Insurable Value (TIV) of $2 million per location. The Property policy form includes Ordinance or Law coverage. The General Liability limits per location are $1 million/$2 million. Property coverage can be written on its own or in conjunction with General Liability insurance.