How many individual real estate investors are in the U.S.?

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How many individual real estate investors are in the United States of America today? I could not find a good resource for the number so I decided to do my own research and make my own guesstimate. My guesstimate number of individual real estate investors in 2019 is …

10 to 11 million individual real estate investors

Is it more or less than you expected? I thought it was about right. Please note that this number represents people who invest in real estate aside from their man jobs. Professional real estate investors are not included in this number.

Number of individual real estate investors (Source : IRS)

IRS has received 10.5 million tax returns with Schedule E, which is a tax schedule for individuals. Schedule E is used for passive income reporting only. It is safe to say that these are the individuals who own properties aside from their main day-time jobs. It is interesting to see that there was not much growth from 2011 to 2015. Many investors took advantage of the environment post-financial crisis and bought defaulted properties with historically-low mortgage rates in 2011-12, but there has not been much growth after 2011.

How many properties do the investors own?

Here is a chart of the number of properties reported by those individual real estate investors.

Number of properties filed by individual real estate investors (Source : IRS)

Individual investors reported 17.5 million properties to the IRS in 2016. The trend is similar to the number of returns filed. Interestingly, the average number of properties is 1.69 from 2003 to 2016 and this number has not changed over the years. Based on the data, we can expect that most of those investors own only 1 or 2 properties for rental purpose. This number was a bit surprising to me because I personally see a lot of real estate investors who own multiple properties around me.

Let’s take a look at different data source.

What kind of investors own how many properties?

According to American Housing Survey, 121. 6 million units of properties existed in the U.S. in 2017, and owners occupied 77.6 million units (44%); renters occupied 44 .0 million units (56%). According to Rental Housing Finance Survey, There are 22.6 million properties in the U.S. and individual investors own 16.7 million (74%) and LLP, LP, and LLCs own 0.3 million (15%). Comparing this to the 17.5 million properties reported to the IRS, the number of properties available seem correct. Individual investors and limited partnerships own 90% of the properties in the U.S.

Breakdown of real estate ownership (Source : RHFS)

What has been the vacancy rate for the rental properties?

Looking at the historical data, interestingly, Vacancy rate has steadily decreased over the recent years, since hitting a high in 2009. In 2009, a lot of investors could not sell their properties and decided to rent them out, resulting in more supply of rental properties than demand, but the market has been recovering since then. This is a good sign for investors (but not for renters, depending on your perspective).

Historical vacancy % (Source : RHFS)
Number of rental properties (Source : RHFS)

Conclusion

I hope my research is helpful in understanding the overall picture and trends in the U.S. real estate investment market. My estimate may not be exactly accurate, but I do not think it is too far from the actual number of real estate investors.

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