Creating a killer investor strategy requires a deep understanding of the real estate market.

That’s not always easy, of course, considering the dynamic and ever-changing nature of the real estate landscape.

Besides keeping your pulse on market trends, you must look deeper into market sentiment and how it impacts investor strategy development and decision-making.

This article will cover the findings from AppFolio’s 2023 Real Estate Investor Report, including the real estate market factors that influence investor strategy.

With these insights, you can revolutionize your real estate management approach, helping you retain current investors while attracting new ones.

Increasing real estate property investments will require an adaptive approach

Our Investor Report revealed that 30% of investor portfolios consist of real estate in 2023, a significant increase from 26% in 2021.

The figure indicates a rising trend of investors allocating bigger capital to real estate properties and will continue to do so in the coming years.

While this trend shows no signs of dying down soon, interest rates, the state of the economy, changes in government policies, market sentiment and dynamics, and other factors can influence it.

Real estate investment funds also rose from 35% in 2021 to 50% in 2023, while the popularity of Real Estate Investment Trust (REIT) went down from 48% in 2021 to 39% in 2023.

As a real estate investment manager, it’s crucial to help investors adapt their strategies to the ever-changing market dynamics.

Doing thorough research and due diligence is critical to ensure investors select assets and manage risks effectively.

A carefully planned strategy helps you and investors navigate the challenges and opportunities that come with the rising interest in real estate investments.

Investors will refine their strategy for choosing residential investment properties

According to AppFolio’s 2023 Real Estate Investor Report survey results, investors prefer to invest in single-family residential and multi-family residential over self-storage, retail, and hospitality properties.

Given the current market, investors are also optimistic about the potential of land, single-family residential, and multi-family residential investments.

The future of investing in residential properties looks good, but you must be strategic in helping investors choose the right property types and locations for long-term success.

A solid investment strategy can also help you track and analyze cash flow and rental income, manage tenants effectively, and stay on top of regulations and market trends.

A more proactive approach is necessary for low average investment amounts

While real estate accounts for 30% of investor portfolios, the average real estate investment amount is down 20% ($763,000).

Recent data shows that only 36% of investors invested a million or higher in real estate properties.

Lower investment amounts mean that investment managers must proactively approach diversification, find the right financing and capital structure, and deal sourcing and volume.

For example, you can source larger deals to execute the same amount of capital to accommodate lower average investment accounts.

It requires broadening the deal pipeline, including preserving consistent potential investment opportunity flows.

Rising investor preference for local real estate calls for alignment with the local market

Most investors prefer prioritizing local real estate investments, with 83% of young investors putting money into nearby local assets.

It’s a significant rise from the 65% local real estate investment in 2021.

Fewer younger investors prefer putting money into nationwide properties, with 46% (from 69%) investing in real estate assets outside their local areas.

With the majority of current investors preferring local properties, investment managers must consider the following real estate market factors that impact strategy development:

• Property location and type. Focus on the property types and areas that local investors want. Determine the most in-demand local properties, such as commercial or residential, to address investor needs.
• Market analysis. Perform a comprehensive market analysis of your investors’ local real estate market. Doing so lets you understand economic indicators, demographics, supply-demand dynamics, and local trends that shape and inform the investment strategy and help investors make informed investment decisions.

The surge of growth investors requires a growth-focused approach

Survey data shows that 77% of real estate investors are growth investors — individuals or organizations focusing on opportunities and properties with high growth value.

Developing a growth-focused approach is crucial to address investor preferences and demands, helping investors maintain a competitive edge.

The real estate market factors that can impact an investor strategy designed for growth investors include the following:

• Economic factors. Analyze economic indicators, including employment rates, consumer spending, and GDP growth, since these affect the demand for property values and rental. It can tell you the market’s overall health.
• Market cycles and trends. Understanding projected and current market trends can uncover real estate growth opportunities. You can also find real estate investment growth opportunities by diving deep into vacancy trends and supply and demand dynamics.

Developing, executing, and maintaining an investor strategy involves many moving parts, requiring time, effort, and resources.

Streamline investor strategy implementation and eliminate manual work by working with reliable Corporate Real Estate (CRE) partners such as AppFolio Investment Manager.

It can make your main operational workflows more efficient, including real estate investor strategy development and implementation.

With a partner like AppFolio Investment Manager, you can gain actionable insights and tactics to help investors maximize their investments.

With AppFolio Investment Manager’s suite of tools, you can optimize everything — from end-to-end control and visibility over your workflows to automatically paying investor distributions.

Develop a winning real estate investor strategy

Many factors impact your investor strategy development and implementation, but one vital aspect you must not ignore is the real estate market.

Understand the critical real estate market factors, dynamics, trends, and more to create an investor strategy that helps investors achieve meaningful returns.

Start with this guide’s real estate market considerations and determine how they can shape and inform your investor strategy.