By startingpoint June 16, 2014

 Buy and Hold Investors VS Hedge Fund Investors

There are many different types of investors that purchase real estate. In order to better market your sale, it’s important to understand the different types of investors that may be interested in purchasing it. Today we’re exploring the difference between Hedge

Funds and Buy and Hold Investors.

Hedge Funds

Hedge funds are a fairly recent hot trend that we are seeing in the real estate investment world. Typically you will see certain areas and neighborhoods that are targeted by hedge funds. While this creates activity in the real estate market, if they buy in bulk keep in mind that it will drive up prices. This type of buyer is typically looking for single-family homes to utilize as rentals so they can get a return on the investment while holding the real estate, thus it is a buy and hold strategy that they employ. They are primarily purchasing properties in harder hit states from the housing crisis, because of the better deals to be had. Do keep in mind that hedge fund managers make money by lining up investors and purchasing properties. So they get paid the fees (think asset management fees, acquisition fees, etc.) regardless of how good or bad the investment actually is for their investors. The housing market is different then the stocks or bonds market so hedge fund investors will be a different beast to work with.

Pros

  • Typically a cash offer
  • Quick closing

Cons

  • The hedge funds typically buy in bulk which affects market inventory and also drives up prices (this could be good or bad depending upon your situation)
  • Hard for regular or first-time buyers to compete with a cash offer

Buy and Hold Investors

This type of investor knows what they want to buy. They are typically very thorough in the evaluation of the property and are looking for something that they can hang on to for the long term. With this type of scenario it allows you to buy a property, fix it up, then sell it to them so they can put a tenant in, OR you put a tenant in and sell it turn key.

Pros

  • Typically they are ready to move on a deal fairly quickly on account of them wanting to get the deal closed and beginning to generate income from renting out the property

Cons

  • They know what they want and usually are pretty well educated on the market and properties, therefore they try to negotiate on price as much as possible

Understanding your buying audience is important for properly marketing your real estate investments. For more information on marketing, selling, and buying real estate stay tuned to our blog and remember to follow us on Facebook, Twitter, and Pinterest.