Those guru driven buyers who just had to "get in" face the greatest challenges. Those folks didn't care about cash flow or the lack thereof. That would be almost anyone who bought at full price post covid. I suspect the window for selling may be about to close in certain areas of the country. Sales will still occur, but the question is at what price point and will it be enough to exit without paying or being short.

Investor-Owned Home Sales Reach Highest Levels in Decades

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%).......

.........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......

.......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.

"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."

"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."

He's right on this point. There's no problem finding well qualified candidates here.

Missouri and Oklahoma, where each state saw landlords part with 16.7% of the market share of sales.

Interestingly, these states also saw the most buying activity, with investors in Missouri buying 21.2% of all homes, followed by Oklahoma (18.7%).....

So, 16.7% of house sales were BY investors, and 21% of sales were TO investors. How exactly does this demonstrate that investors are leaving in droves??

Just saw TODAY that we have new luxury apartments with vacancies - never knew about this set. $3200+ but of course amenities.

The pace of life in my area is slow. It takes us an hour and half to watch sixty minutes. So not surprising, when you hear luxury new construction around here, it translates to a double wide.

New construction builds here are taxed so much higher than an older place so it encourages to overhaul and reuse instead of building from scratch.

What I am reading into this article is a perceived value of new construction is so much more superior over an existing house. So I would not go for an even fight. If you had a choice between a $3,200 new construction APARTMENT or a $2,800 remodeled SFH - there would be absolutely no thinking for me.

However, if I was 35 years younger, I might consider what I considered to be trendy. So I would make sure those technology features that the new build has, were implemented into my places.

Good article. It shows the market is in transition. I can't tell you what direction it is headed at this point....and that isn't a good thing. There have been so many market forces acting as disruptors that it is hard to know what the baseline actually is.