Real estate investors are eschewing the tried-and-trusted strategy of buying and holding assets for the long term and jettisoning their rental properties to escape a softening market, according to a new report from Realtor.com.
Data from Realtor.com’s Investor Report showed that about 11% of all homes sold in the U.S. last year were from investors, the highest percentage in that sector since 2001. The median sale amount for these rental properties was approximately $350,000, the report says.
Data showed that investors sold more than they bought in 2024, with sales increasing by 5.2% year over year. In total, investors sold 509,000 properties last year, a figure significantly higher than pre-pandemic levels, although lower than in 2021 and 2022, when buyer demand reached an all-time high.
“The reason behind investor sales has shifted since the [COVID-19] pandemic heyday,” Realtor.com senior economic research analyst Hannah Jones said on her company’s website. “Investors may no longer be selling to cash in on soaring home values, but rather due to market softening and easing rents.”
Investors in the Midwest, South Are Selling the Most Rentals
Crunching the numbers, the Midwest and South experienced the most investor sales, specifically in Missouri and Oklahoma, where each state saw landlords part with 16.7% of the market share of sales. Georgia was close behind with 15.9%, followed by Kansas, Utah, and Nevada, with 14.3%.
Interestingly, these states also saw the most buying activity, with investors in Missouri buying 21.2% of all homes, followed by Oklahoma (18.7%), Kansas (18.4%), Utah (18%), and Georgia (17.3%).
Investors Bought Homes Priced Right Under $300,000
Realtor.com contends that the most affordable markets in the U.S. attract investors who cannot afford to buy elsewhere due to the general housing shortage. Their data shows that investors bought homes priced at $282,000, which was more than $70,000 less than the median sales price.
“As a result, budget-conscious buyers often find themselves in direct competition with investors for the most affordable properties, a contest many are unable to win,” Jones said.
Small Investors Increased Their Share
Realtor.com’s report showed that mom-and-pop investors with fewer than 10 properties made up a significant 59.2% of investor purchases, the highest percentage ever recorded, while larger investors, with 50 or more homes, dropped to 21.7% of purchases—the lowest percentage since 2007.
In total, smaller investors purchased 361,900 homes in 2024, up 3.7% year over year. The report showed that the states with the largest growth in investor purchases compared to 2023 were Delaware, Ohio, and Washington D.C. Conversely, investor selling grew the most in Mississippi, Nevada, and South Dakota.
Most Investors Used Debt
Despite a high-interest rate environment, data shows that most investors still prefer to use debt to buy their rental properties rather than pay all cash. Small investors saw their cash purchase share of the market fall from its peak of 65.6% back in 2023 to 62% in 2024, marking the lowest small investor cash purchase share since 2008. However, leveraging would only be effective in places where it is affordable, such as less expensive homes in areas with the most buying activity, primarily in the Midwest and South.
Even here, to cash flow at current rates, investors would still need to make a sizable down payment, which would be more affordable in more affordable markets, or buy at a deep discount. The changing investment landscape marks a notable shift from recent years when a lack of inventory led to bidding wars and multiple offers.
“Investor trends signal a transition,” said Danielle Hale, chief economist at realtor.com, in a press release. “Nationwide, investors picked up more homes on net in 2024, as smaller investors were a growing majority of investor buyers. But with investors selling at a new high, the market saw the smallest net investor buying activity in five years, lessening one of the notable headwinds for entry-level buyers who often compete with investors.”
Reasons for Selling: The Hard Reality of Investing
The headlines speak volumes. Investors are jumping ship in record numbers. Although the advantages of owning real estate, especially investment real estate, have been proven to be great wealth builders, the reality is that it’s very challenging. Many buyers get in over their heads before they realize they don’t know what they’re doing or regret blindly following an investment guru, friend, or realtor into buying an investment they shouldn’t have.
Financial media guru Suze Orman is rarely a sounding board for investors, but there is a lot of truth in her advice to novice investors about being wary about investing in rentals due to the cost of maintenance, property taxes, real estate agent fees, and the difficulty of being able to sell.
BRRRRing at the Wrong Time
The Realtor.com data did not account for interest rates, which have remained stubbornly high. Many investors may have purchased homes with hard money, expecting rates to stay low so they could implement the BRRRR strategy. However, upon completing their rehab and coming to refinance, rates had risen to 7%, no longer making the rental a good investment without cash flow, leaving them with no choice but to sell.
Investing Without Deep Pockets
Unless you have extra cash set aside to account for vacancies and maintenance, owning a rental property can become a financial drain that only pays off after holding it for a long period. Amidst economic uncertainty associated with layoffs and tariffs, people are no longer as secure in their jobs as they once were, which could again be a reason to sell.
Stiff Competition for Tenants
Although small investors comprise the majority of the U.S. single-family buying demographic, Wall Street has this valuable commodity in its sights and has been spending billions to capture the market. With many buyers unable to get onto the property ladder due to high prices, insurance, and interest rates, REITs have been purchasing their own built-to-rent communities in large numbers.
AvalonBay Communities, one of the largest multifamily real estate investment trusts in the U.S., recently purchased a set of 126 build-to-rent townhomes in Bee Cave, Texas, for $49 million, according to The Wall Street Journal. The firm said it intended to invest billions.
“We think we’re really in the early stages of what could be a pretty significant, almost new asset class,” AvalonBay’s chief investment officer, Matt Birenbaum, told the Journal. Build-to-rent communities doubled in housing starts from 2020 to 2024, increasing by double digits in many areas, according to the National Association of Realtors’ analysis of U.S. Census Bureau data. Other powerhouse REITs getting into the market include Blackstone, Invitation Homes, and Premium Partners.
Although Birenbaum told the Journal, “We are not competing with individuals trying to buy individual homes in the private market,” the fact is that they are competing for the same tenant base. REITs have the advantage of building brand-new homes with the economies of scale, offering amenities, and having deep pockets. They are a natural draw for many tenants as long as their price points are affordable, causing the tenant pool to shrink for smaller investors.
Final Thoughts
The housing shortage, particularly in the Northeast and California, means that small landlords will have a much better chance of finding tenants here than in the Sunbelt, where construction has boomed since the pandemic. However, prices are higher in the coastal markets and the chances of cash flowing less if you have not owned the property for a long time.
If interest rates remain high and economic uncertainty persists, rents will eventually soften. There will inevitably be an inflection point where, even in less expensive markets in the Midwest and South, investors will find it harder to justify owning rentals that are not cash-flowing. We may have already reached it.
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