How Much Do Investors Pay for Houses?

I combine housing sales from the England and Wales Land Registry with online rental listings from property portal Zoopla to identify buy-to-rent transactions-known as buy-to-let (BTL) in the UK. These sales are procyclical, concentrated in areas where the housing market is performing well, and more common for small dwellings. Comparing these transactions against all other housing sales in 2009-2014, I show that BTL investors pay less than other buyers for the same properties. The heterogeneity of discounts across regions and property types is consistent with a simple theoretical framework that emphasizes the drivers of investors' and homeowners' demand for houses.