One question I was hung up on when I first started investing had to do with whether real estate investing was really a help to society. Over time I’ve realized that the answer to that question is – It depends.
Investors definitely are not a help to society if we are dishonest, don’t do what we say, or purposely fail to act professionally. This can take the form of may different scenarios including failure to maintain a rental, mis-representing yourself when dealing with a potential seller, or getting into a contract with no intention to ever close.
The perception of real estate investing also suffers thanks to smooth-talking salesmen who profit nicely by selling hope and hype to the public. Not all real estate education is bad, in fact some is excellent, but the industry does attract its share of smoke and mirrors. All of this has contributed to the often-poor perception of real estate investing. So how is real estate investing a help to society?
Real estate investors provide liquidity to the market. Imagine what it would be like if nobody wanted to buy houses that were not bank financeable. A few houses might sell to someone who wants to get a deal and fix the place up themselves to live in it. However, those people are few and far in between. The overwhelming majority of non-financeable houses are sold to investors. Without investors, entire neighborhoods could eventually become abandoned and crime ridden because no one would buy once a house fell below the financeable condition. When there are no buyers, those home values would plummet.
Real estate investors provide safe and affordable housing. Not everyone can afford to buy a house and for that matter, buying a house is not for everyone. What real estate investors do provide, is great options for those who prefer to rent. Attitudes towards renting are changing and investors are on the forefront in meeting that demand.
This category is huge and it’s not possible to list every way an investor becomes a valuable option for a home seller. Real estate investors provide a valuable option to people in bad situations who need to sell immediately. This can be for a variety of reasons…tenants are taking advantage of them, owners can’t afford the maintenance, they can’t afford the property taxes, they can’t afford the mortgage payment, they inherited a property they don’t want, city code enforcement is on their back, etc. Sometimes listing the house with a real estate agent doesn’t solve those problems because they just want it sold. All real estate agents can do is promise to TRY to find a buyer. Also, many real estate agents who work with traditional buyers and sellers, don’t understand the needs of a distressed seller. Most distressed sellers do not want to fix the house up or allow strangers to randomly walk through their house for the next few months. Investors, however, can provide something even the best agents can’t, assurance to the seller that their house is SOLD. To the right seller, that is huge.