Are investors taking over your neighborhood?

They’ve got the cash and the manpower working in their favor. They’re buying up parts of your neighborhood in hopes of turning quick profits, and in their own words, moving a once-stagnant market forward. For first-time homebuyers, they’re seen as potential hurdles.

The presence of real estate investors in San Diego County has mushroomed. A total of 1,030 properties were sold in June to absentee buyers, mainly investors and buyers of second homes, DataQuick numbers show. That’s the highest level of absentee-buyer activity since 1,089 in June 2005 — when countywide home prices neared a dizzying peak of $517,500 and amateurs placed risky bets in the real estate game. Their share now of the total housing market in the county has skyrocketed, too. Absentee sales made up 30 percent of all homes sold in February, a peak, and has been in the 28 percent region ever since.

An absentee buyer is someone who indicates at the time of sale that their property tax bill be sent to a different address, based on DataQuick’s definition.

So are we back in 2005, a time of fast-and-loose borrowing and rocket-fast price appreciation? Not at all. In today’s market, mortgage underwriting remains tight and prices are steadily climbing. Also, investors now are savvier, eyeing smaller profits and have found strength in numbers. Instead of going at it alone and buying one-offs, they’re working with others and rehabbing several properties at a time.

“Unlike the dumb money of the 2003-2005 period, I would characterize the buyers of 2008-2012 as pretty sophisticated, often with full-time acquisition staff and more likely to do a lot more research before buying,” said Norm Miller, real estate professor at University of San Diego.

Another major difference in the current market is inventory levels. Right now, fewer than 6,000 homes are listed for sale in San Diego County, 55 percent lower than what was available about two years ago, the latest numbers from the San Diego Association of Realtors show.

Fewer homes on the market means more competition for anyone who wants to buy, from the investor looking for his next project to a couple looking for a starter home. It also means higher chances of multiple bids, sometimes upbids, which can dash first-timer hopes of buying in the under-$300,000 pricing area.

“There’s almost no inventory,” said Stan Gendlin, acquisitions manager with CT Homes, a local real home-flipping company. “Investors are looking for anything they can get. Everyone is bidding each other up.”

What kinds of tactics are investors adopting?

Curtis Gabhart has been a full-time real estate investor for 12 years. Like many in his field, he goes where there are opportunities.

Before the real estate bust, Gabhart’s focus was apartment buildings. Post-bust, it’s been single-family homes.

Problem is, he and others like him have already gobbled up most of the under-$300,000 inventory, which also is popular among first-time homebuyers. Homes in that price range have been popular since they cost less to acquire, and if they require little work, could yield higher, faster profits.

So what are investors doing instead? Moving up in price. In Gabhart’s case, he’s shifted to the million-dollar market, where there’s less competition. This is considered rare among flippers.

Gabhart and his company so far have bought, flipped and sold a 5,700-square-foot home in Poway they picked up for $1,150,000 and sold for $1,415,000 within roughly 90 days, which includes renovation and time on market.

The process worked so well that they’re in the midst of another luxury flip. This time, crews are gutting and redoing a 1960s-era home in Del Mar that was bought for $1,250,000. The envisioned selling price is low- to mid-$2 million.

“We’re not necessarily looking for just high-end, but (instead) if we have the capacity to close the deal,” Gabhart said.

What Gabhart means is price isn’t the only important factor in an investment. It also must make sense logistics- and time-wise. There also must be a market for the product.

Roger Faulkner with his partners at RBD Ventures, another local home-flipping company, also have begun shifting from the entry market to the $500,000-$600,000 range, considered the middle of the move-up market.

“Last year, it was about the first-timer,” Faulkner said. “Now, we’re moving to midlevel buyers ... They’re a lot of the same people. They’re military families with teens, young professionals at Qualcomm.”

Move-up activity in San Diego County has been evident this year, DataQuick numbers show.

When comparing June 2011 to June 2012, sales of homes between $300,000 to $800,000 rose nearly 11 percent.

What does this absentee activity mean for market?

Investors have left heavy imprints on local communities since the start of the recession.

In the first half of the year alone, they’ve infiltrated the first-time homebuyer markets of areas like College, northeast Carlsbad and Golden Hill. In those areas, more than 50 percent of sales priced below $300,000 were by absentee buyers.

The heavy investor presence has posed challenges for first-time homebuyers, they say. Investors still have a stronghold on the dwindling sub-$300,000 market, which is the typical pricing for first-timers.

Ben Barrios and his wife house hunted in the $300,000-$400,000 range for a total of 10 months before finding a place in Lemon Grove they’ll soon close on.

Their competition: real estate investors. In that area, absentee buyers snatched up 32 percent of properties in the under-$300,000 range from January to June.

“My Realtor said (there were) about 13-16 offers on this house,” said Barrios, who increased his bid by $25,000 to increase the chances of being accepted. It worked.

“You gotta have a lot of patience and need to be willing to walk away from things” when they don’t work out, he said. “If you didn’t get it, then there’s a better house out there.”

Alternatively, today’s intense competition could bode well for home sellers.

“For sellers, every property is vetting multiple offers, usually above asking price,” said Gendlin, of CT Homes. “They don’t negotiate with you because there’s no inventory ... they’re being aggressive with offers.”

A challenge that remains for potential sellers is loss of wealth. U.S. homeowners lost $7 trillion of home equity between 2005 and 2007 and some are waiting for that value to return.

Ultimately, what does recent absentee activity mean for the local market?

Miller, the USD real estate professor, believes the effect is positive.

“Anything that can take property off the market is a good thing,” he said. “The worst thing is (to have) abandoned properties … It’s important that someone turns them around.”

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