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While the real estate industry continues to struggle with a current sales pace of only 3.95 million homes for 2024, did you know that real estate investors are scooping up an additional 1 million vacant and/or unlivable homes? Even more surprising, up to 97 percent of these investors are mom-and-pop buyers. For savvy agents and brokerages, this virtually untapped market can be a goldmine for your business.
New Western helps approximately 200,000 investors in 42 major markets locate potential flips and rehabs. Kurt Carlton, president of New Western, recently joined me to share his company’s latest research from their quarterly Flip Side Report. Their findings upend much of what the industry believes about today’s real estate investors.
Homeownership lays the foundation for having a better life
Carlton strongly believes that homeownership is the path to joining the middle class and building wealth.
“If we don’t have the opportunity for people like teachers and nurses to purchase homes, then we don’t really have much upward momentum leading into the middle class. That can result in a host of other problems we’re going to face if we don’t have affordable inventory, Carlton said.
“If you look at the inventory made available by real estate investors where they find a vacant home and return it to market, it’s some of the most affordable inventory that is on the market. On average it’s 21 percent more affordable that then median price for new homes.”
“If you think of the affordability band of these homes, these real estate investors are really trying to protect homeownership by making more inventory available for the aspiring homeowner.”
3 top takeaways from New Western’s latest Flip Side Report research
According to the New Western website, here are the top three key takeaways from their latest Flip Side Report research:
1. Local investors are key players in housing inventory
Independent investors, often local and small business owners, continue to significantly address the housing inventory shortage ahead of institutional investors and builders.
2. Demographic shifts among real estate investors
The real estate investing landscape is diversifying, with Gen Z and female investors becoming more prominent.
3. Local investors make a positive impact on affordable housing
Local investors are a pivotal group in making housing more affordable by revitalizing neglected properties and returning them to the market at lower price categories.
Investors rehabbing houses are making a major impact on the real estate market
While NAR is reporting that we’re on track to sell about 3.95 million homes this year, New Western’s research shows that mom-and-pop rehab and fix-and-flip investors constitute the bulk of market transactions.
Carlton shared the following findings in our interview:
- Close to 1 million homes will be purchased by real estate investors.
- Only 28 percent are purchased through the MLS. Assuming 1 million investment sales, that translates into approximately 720,000 homes are being purchased by investors outside the MLS.
- Rehab and fix-and-flip investors are adding to the housing inventory, rather than reducing it
In many cases, these properties have been vacant and often unlivable.
“Most of the real estate community thinks about investors purchasing off market properties as taking away from the inventory, but what they’re doing is identifying a lot of this inventory that is vacant, that is distressed, and actually preparing it to be listed on the MLS, contributing those extra units,” Carlton said. “Once these homes are fixed and livable, most of them are being listed for sale on the MLS.”
Today’s real estate investors are not who you think they are
If you mention anything about investors purchasing single-family residences, most people roll their eyes because they assume these sales are to institutional investors.
That’s simply not the case based on New Western’s data.
From 2021 to 2024, note the significant decline in the number of institutional sales:
- 2021: 17 percent
- 2022: 14 percent
- 2023: 8.5 percent
- 2024: 2.8 percent year-to-date
Carlton went on to explain: “The overwhelming majority of these homes after they’re rehabbed are nice, they’re fixed up, they’re livable, and they’re being listed on the MLS.
“Institutional investors have ceded the whole space back to independent, local real estate investors, and that’s amazing. Only 2.8 percent of the current transactions that are rehabs and flippers are being done by institutional investors.”
‘The Great Resignation’ is feeding the rehab and fix-and-flip markets
Carlton has been tracking this data for the past three or four years, and here’s what he discovered.
“We’ve had this Great Resignation. Everybody’s left these 9-to-5 jobs, these corporate rat races. And they’ve gone into these side hustles, or whatever you want to call it, and a lot of people have come into the space,” Carlton said.
“If you look at the investors today, you’ve got a lot of these corporate refugees that have some money in the bank, they have some management expertise from their career, and they’re transitioning from managing employees to managing contractors, and they’re succeeding.”
The hot new date night?
Carlton recently came to a fascinating realization, largely due to his company’s most recent Flip Side research data.“It’s less about running a spreadsheet and trying to eke out a return and more about being involved in the community. It’s a passion project.” Carlton said.
“We see a lot of husband-and-wife teams. They’re involved in taking something, which almost always is these blighted vacant houses, and returning them to the market. For years they have seen this on television, and they now get to do it every day. So, it’s becoming a reality where you can make real money.”
So, what’s Carlton’s take on the hot new date night for Zoomers and Boomers?
“Who would have thought that the hot new date night for both Zoomers and Boomers is rehabbing a house?”
The major rehab challenge lurking ahead
Carlton warned of an enormous issue that has already started to impact the current listing inventory.
“During the last big builder boom leading up to Great Recession in 2008, we built 25 percent of the homes that have ever been built in the United States. We built a lot of these homes very fast, very cheap, and then we stopped building homes.”
Since then, builders have been unable to keep up with the growing demand.
“That’s why we’re in this affordability crisis. People keep having kids, they want a home, but we did not deliver the inventory,” Carlton said.
Carlton cited several examples of challenges agents are already confronting in these 20- to 40-year-old homes that constitute about 20 percent of current inventory.
- Concrete slabs with PVC pipe leaks where the floor will have to be jack-hammered to replace the broken pipe.
- 20- to 30-year-old roofs that will soon have to be replaced.
- Boomers aging in place, resulting in significant amounts of deferred maintenance.
Fixer-uppers are too overwhelming for most agents
Carlton then explained why these properties often do poorly if they’re posted to the MLS.
“The MLS is great for traditional transactions. When you put a listing that needs everything on the MLS, every Realtor who has ever had listings understands that it will require a tremendous amount of time and effort and that everybody’s probably going to be unhappy at the end of the day,” Carlton said.
When these properties are valued under $150,000, the amount of time and effort the listing agent will incur to close the transaction is simply not worth it. Consequently, it’s not surprising these properties often sell off-market to investors.
The opportunity is immense
Carlton explained the massive size of this opportunity, especially given that “there are 15 million vacant homes in the U.S., and there is an overwhelming demand for housing.”
The bulk of the houses that are being rehabbed by New Western’s clients are in the significantly lower price ranges (as little as $80,000) as opposed to $200,000, $400,000 or $600,000.
The following chart from the New Western website illustrates the size of this opportunity in 10 major markets across the U.S.
A ‘bombshell finding’
In the chart above, “Vacant homes (Flip Opportunity)” dwarfs both “Flipped Homes Sold” and “New Builds Sold.”
What’s most surprising, however, is that in each of the 10 markets cited above, the number of “Flipped Homes Sold” also exceeded the number of “New Builds Sold.” This is something we have never seen before.
‘The perfect storm’ for mom-and-pop investors — agents don’t want rehab listings
At noted above, only 28 percent of the approximately 1 million home sales to investors in 2024 are from the MLS. What’s fascinating is how many listing agents have referred a rehab listing to New Western in the past 12 months.
“I think in the last 12 months, we’ve had 50,000 properties that have been delivered to us from listing agents that just said, I don’t want to list this. This is a value-add property,” Carlton said.
This is a win-win for both the seller and their agent since the rehab investor often puts these properties back on the MLS for sale, generally through the agent who made the referral in the first place.
Properties across multiple price ranges and often located in better locations than new homes
Rehab and fix-and-flip investors work in multiple price ranges depending upon the market as well as upon how much they’re willing to spend on the rehab process.
In most cases, new homes tend to be in undeveloped areas of a city, as opposed to prime locations where many of the 20- to 40-year-old homes are currently located.
“While builders are getting better at it, they’re still not able to deliver affordable homes, especially in the neighborhoods and areas where they’re really needed,” Carlton said. “Most of the affordable homes are being produced by builders where land is cheap and the demand really isn’t there.”
Women rehabbers emerge as important players in this space
One of the unexpected findings in the New Western research was that women are a growing segment of investors.
“The independent female real estate investor segment is starting to grow, and they’re outperforming the male segment. They spend less on their rehab, they have more instances where their home sells above market value, and their homes sell faster, “Carlton said.
“It makes sense since females usually make the purchase decision when it comes to where to live. If there’s a female designing all this for a female decision-maker, it should result in a better, higher performance and the home should sell faster and for more.”
Zoomers are starting to outperform their Boomer counterparts
Carlton said their data shows while Boomers are cautious, Zoomers move fast.
“Zoomers are so much faster because of what they can learn on YouTube, the social media, and all these different strategies online that apply to these homes,” Carlton said.
“It used to be that you would read a book on how to invest in real estate, but by the time that book arrives from Amazon, the Zoomers have already figured out 12 different ways to invest in this house, things like ADUs, house hacking, other things that are going on. They’re able to look at the same asset a Boomer would and often outperform them on their ROI on these properties.
Real estate agents are in the catbird seat
Real estate agents who know their local market areas well are uniquely positioned to spot vacant and run-down houses that may be great targets to be rehabbed or flipped. Instead of walking away from that run-down property that needs major work, understand that investors, rehabbers and flippers see these properties as golden opportunities.
Take advantage of it — it’s a win for you, the sellers, and the mom-and-pop investors who are helping America turn the housing shortage and affordability crisis around.
Bernice Ross, president and CEO of BrokerageUP and RealEstateCoach.com, and the founder of RealEstateWealthForWomen.com is a national speaker, author and trainer with over 1,500 published articles.
