Article originally posted on homelight.com on March 21st, 2022
1. House Flippers
Housee flippers are real estate investors that purchase properties at a discount with the intention of remodeling to add value, then resell those properties quickly for a profit. House flippers look for specific improvements to boost equity, such as cosmetic updates, mechanical repairs, an addition, or a change to the layout. Doug Van Soest, who owns a house flipping business in Southern California, purchases an average of 40 to 50 homes per year and says he typically aims for at least a 10% return on his investment.
Example house flipping companies:
- HomeVestors / We Buy Ugly Houses
- Certain investors on HomeLight’s Simple Sale platform
2. Buy-and-hold companies
Buy-and-hold companies purchase houses with the intention of renting them to tenants for a profit. “Similar to flippers, they will look to acquire properties that offer enough potential equity or cash flow that they are able to make an acceptable return on investment for their owners or stakeholders,” explains Owen Dashner, owner of Red Ladder Property Solutions in Omaha, Nebraska. Most of these types of investors use the “BRRRR” model, which stands for “Buy, Rehab, Rent, Refinance, Repeat.” They tend to focus on multi-family buildings and other types of properties desirable to renters.
Example buy-and-hold companies:
- Invitation Homes, operating in 16 metropolitan areas including Atlanta, Chicago, Miami, Houston, and Las Vegas.
- American Homes 4 Rent, serving metropolitan areas in 12 states including Arizona, Colorado, North Carolina, and Tennessee.
An iBuyer, also known as an instant buyer, is a business that uses real estate market data and technology to make immediate offers on houses, sight-unseen, after being contacted by an owner. Most iBuyers focus on buying houses that don’t need a lot of work and charge a service fee to sellers. Data from zavvie shows that service fees for iBuyers in late 2021 were 5.8%, which is “not out of line” with the typical 5%-6% real estate agent’s commission. They also may request a credit called a “concession” to cover repair expenses, which in 2021 was an average of 3.1%.
Example iBuyer companies:
- Zillow Offers used to be a major iBuyer, but the company permanently shuttered its iBuyer operations in Nov. 2021.
4. Trade-in companies
Many people need to sell their existing home in order to have enough funds to cover the purchase of their new home. Some house buying companies offer or specialize in what are known as trade-in programs to make this a smoother process. Generally trade-in companies will offer to buy your current home, freeing up your funds to buy a new home and removing the need for a home sale contingency.
Example home trade-in companies:
- HomeLight Trade-In
- Orchard Move First
5. local investors
Some home-buying companies focus on purchasing houses in specific regions, states, and cities. These companies may have a national or multi-state presence under a unified brand bolstered by local offices run by associates affiliated with the umbrella company. Other local investors may be even more “mom-and-pop” in that they have small teams and maybe only work with a handful of homes per year.
Example local investors:
- These are the individual investors and businesses that appear when you do a search for something like “cash home buyers in [my city.]”
- Some of these companies may specialize in your specific area or be associated with a brand serving a broader area.
Click on the link below to see the rest of the list and learn more about the process: Link