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New Study: Where Self-Directed Real Estate Investors Are Buying Property

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Perhaps the biggest advantage self-directed IRAs offer is the ability to invest in what you know. For many Entrust clients, that means real estate. More Entrust clients invest in real estate than in any other asset.

Their reasons for investing in real estate include the desire to: diversify their investment portfolios, benefit from long-term, tax-advantaged market value growth and generate an ongoing revenue stream while they own the asset.

Every year, Entrust produces a report that describes trends and activity among our real estate investors.  This article highlights their 2016 real estate purchases. We’ll look at sales in our next article.

 Where Entrust Clients Bought Real Estate

California, Texas, Colorado, Florida, and Arizona are the top five states where clients bought property in 2016. This has been consistent for several years.

Looking at the list of 12 states where Entrust clients bought real estate, purchases in Missouri increased nearly 4% over 2015. And for the first time since we’ve been tracking purchases, clients bought property in Ohio, Tennessee, Indiana, and Washington. California, however, remained the top choice, with one-quarter of all purchases made there. Find out where your state is on the list.

Taking a broader look at the regional level, purchases in the West actually declined by 7%. It may have been that higher prices discouraged investors from buying there. The decline in purchases in the West was more than made up for in increases in the Midwest (up 4%) and South (up 5%). This may have been the result of investors seeking property in other, less-expensive regional markets.

Where clients buy is closely related to where they live. Floridians and Arizonans, for example, maintained their solid, 100% preference for local real estate, and Coloradans increased their in-state purchases by 8%, from 72% in 2015 to 80% in 2016. . Californians (57%) and Texans (88%) were more willing to buy out of state in 2016 than in 2015. This may have to do with the hot property markets in those two states, with investors looking for better deals a bit farther afield.

What Investors Paid for Real Estate in 2016

A glance at the stock market, unemployment figures, or the business news shows that the US economy is picking up steam. In general, the real estate market is heating up as well. As a result, Entrust clients paid more in 2016, when the average purchase price was $192,563 than in 2015 ($177,777 average purchase price).

But not all regions benefited equally from higher prices. Here’s where prices landed, on average, for the top five states:

  • California prices increased $130,000 (up 66%)
  • Texas prices increased $98,000 (up 61%)
  • Colorado prices increased $81,000 (up 54%)
  • Florida prices decreased $9,000 (up 7%)
  • Arizona prices decreased $22,000 (up 17%)

What Kind of Property Investors Bought

Historically, investors have preferred single-family residences, and that held true in 2016. The number of single-family houses bought increased 7% over 2015, from 44% to 51%. Multiple-family residence accounted for just over a quarter (27%) of purchases. The big change came in clients buying vacant land; that number increased from 12% to 18% year over year.  Commercial real estate purchases declined from 3% to 1% in 2016.

Learn More

The complete 2017 Real Estate Investor Market Research Report, including information on the US rental market, is available on our website. Our Real Estate IRA Center provides comprehensive information on how to invest in real estate and an array of other assets using your self-directed IRA.

Download the latest Real Estate Investor Market Research Report here.

Self-Directed IRA Basics Report

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