Buyer differences: owner-occupiers vs property investors
Owner-occupiers have very different buying motivations to property investors. It’s crucial for any real estate professional to understand these fundamental differences. When you do, you’re likely to have more success, including more satisfied clients and referrals.
Owner-occupier buyers
- Owner-occupier buyers are more emotionally driven than investment property buyers.
They are buying a property to live in themselves, so they will want the home to suit their needs, not the needs of a potential tenant. The features that they need and want will depend on their specific situation and lifestyle.
For example, whether they have a growing family or are downsizing, whether the home is in the neighbourhood where they want to live, whether it is close to their work, friends, other family members or the schools that their children attend, and whether it has features that they may or may not want (like a pool).
- Owner-occupier buyers are not as numbers/profit-driven as investment property buyers.
The selling price of a property will of course be important to an owner-occupier buyer in terms of their price budget, but the property’s potential for capital growth will be a less important consideration than it will be for investment property buyers.
Investors will also evaluate a property’s potential rental income generation in relation to its selling price, which won’t be a consideration for owner-occupiers.
- Owner-occupiers have different finance options to investment property buyers
Owner-occupier home loans have lower interest rates than investment property loans because lenders perceive investment properties as being higher risk than owner-occupied properties.
In addition, first home buyers who are buying to be owner-occupiers can potentially be eligible for financial incentives such as a First Home Owner Grant, the First Home Guarantee and stamp/transfer duty exemptions or concessions. These incentives and their eligibility conditions vary in each State and Territory of Australia, but they aren’t available to investment property buyers, even if they are first-time property buyers.
Investment property buyers
- Investors are less concerned about location than owner-occupier buyers.
While location is obviously important in terms of both capital growth and rental income generation potential for investors, they aren’t looking to live in the property like owner-occupiers. Investors therefore aren’t as limited by geographic location as owner-occupiers when searching for a property to buy.
Property investors can buy anywhere they can identify a property that will provide a good return on investment (ROI). That could be in a different city, State or Territory to where they live themselves.
- Investors don’t need to see a property to recognise a good buying opportunity.
Investors are looking to create wealth. They don’t necessarily need to see the property in person themselves, they are more concerned about whether the potential ROI numbers and cash flow stack up. They may rely more (or completely) on a buyer’s agent to inspect properties on their behalf, while owner-occupiers tend to be more emotionally invested and involved in the inspection process.
- Investors will be more likely to have a buying and selling strategy than owner-occupier buyers.
Investors could be buying their first investment property or adding to their existing portfolio of multiple properties. Either way, they are more likely to have a buying and selling strategy in place than owner-occupiers who are most interested in just finding the right home for their own needs and wants.
For example, an investment property buyer’s strategy could be to buy, renovate and flip a property for a profit as quickly as possible, or to buy and hold a single property, or to continue adding to their portfolio with multiple properties over time. It all depends on their goals, and those goals can vary among investors.
- Buying an investment property can be riskier than buying as an owner-occupier.
The latest figures from CoreLogic’s Pain and Gain Report show that investment property buyers are three times more likely to make a loss than owner-occupiers when they resell their properties.
Much of that risk comes down to buying the wrong property at the wrong time. For example, impatient investors who buy at inflated prices and who want to sell quickly, or those who buy off-the-plan apartments in oversupplied areas.
A buyer’s agent who is well-connected can help investors avoid these issues by steering them away from overpriced properties. The buyer’s agent effectively acts as a property finder, helping to locate suitable properties that meet the investor’s criteria.
The buyer’s agent’s market knowledge and connections can help investors to minimise their property-buying risk, and a good buyer’s agent will also negotiate the best selling price on the buyer’s behalf.
How I can help
If you’re a real estate agent or a property manager, have you ever thought about honing your skills to become a buyer’s agent?
I started my own successful property investment agency over a decade ago. I now offer buyer’s agent courses for real estate professionals looking to make the transition to becoming buyer agents for property investors.
Contact me today to find out more!