Homebuyer has a broad definition. It is a general term for people who purchase houses. But, it has a few sub-categories worth noting.
Traditional Homebuyer
A traditional homebuyer refers to the person or group of people (often family) who purchase a house for residential purposes. The primary goal of a traditional home buyer is to buy a house to live in. Apart from the sale price of the property, a traditional buyer is attracted to the features of the house more than anything else.
Is the home close to a good school? Is transportation available? Can the kids have their own bedrooms? Is the lawn perfect for gardening? How many stairs are there for senior living?
The questions above – and many more – are often considered by a traditional buyer working with a mortgage lender and a real estate agent to broker a traditional sale. Some may also spend more to get the house they dream of.
According to Zillow Group’s Consumer Housing Trends Report of 2018, 42% of homebuyers belong to the millennial generation, while 61% are first-time homebuyers.
Investors
Home investors are professionally-minded people who invest in real estate. They can be individuals or companies that make money from houses. This type of homebuyer is further classified into several subtypes:
Wholesale Investors
Wholesale real estate investing defines a strategy where the investor buys and sells the property as-is, with no modifications or repairs done to the house. Investors in this line of homebuying purchase the property below its market value yet sell them for a higher price to another buyer without any alterations.
House-flip Investors
House-flipping has been a fad for several years now. In this investment strategy, the buyer purchases the house from the seller and does renovations, repairs, and improvements to the property. After all the upgrades are done, the property is listed in the housing market for a higher price to make a profit and recoup all the expenses.
Buy-and-Hold Investors
The buy-and-hold investment is a slow process for the investor, but not too slow for them to lose money. The investor will purchase a home and can rent it over the years or simply keep it without renting and wait until the market conditions have improved before selling the property.
A buy-and-hold investor uses a cap rate to calculate the yearly expenses of holding the property and the potential profit. This investment type also allows the investor to accumulate real estate properties and grow his portfolio.
Buy-Flip-Hold Investors
An investor that does almost everything stated above practices a buy-flip-hold strategy. The homebuyer – an individual investor or a company – purchases the property, renovates and upgrades it, then rents it out or waits for a better market condition before selling.