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Legendary investor Warren Buffett once said that the key to investing was to “be fearful when others are greedy, and to be greedy only when others are fearful.”
Real estate investors have taken Buffett’s advice to heart. While homebuyers have sat on the sidelines, waiting for interest rates to fall, landlords have been buying rentals at a clip.
A Surge in Investor Purchases
Over the first quarter of 2025, investors were responsible for nearly 27% of all homes sold in the U.S., around 265,000, a staggering percentage not seen in years, according to analytics provider BatchData. The number marked a meaningful increase of 8.3% from the 2020-2023 average.
The buying bonanza is not a blip. Data and analytics firm Cotality shows that investor purchases averaged 85,000 homes per month in the first half of 2025, virtually unchanged from the previous year, despite uncertain market conditions.
Thom Malone, principal economist at Cotality, said:
“Investors expanded their market presence significantly in 2025, building on historically high levels. This demonstrates their resilience in a high-price, high-rate environment. As these adverse conditions are expected to persist, investors are well positioned to meet rental demand. Their tendency to buy with all cash means high interest rates are less of a deterrent. Plus, current high prices can be offset by strong rental returns.”
One-Third of All Home Purchases Were by Investors
Investor purchases even teetered around 32% or one-third of all home purchases earlier in the year, before dipping slightly in June, traditionally a slow time for home sales. However, investor buying remains well above the pre-pandemic norms of 15% to 20%.
“Without this investor participation, many markets would face severe illiquidity and potentially destabilizing price volatility,” according to a report from mortgage trade publication Scotsman Guide. “With traditional buyers sidelined by financing constraints that doubled monthly payments compared to recent norms, investors provide critical liquidity in an otherwise constrained market.”
Why High Rates Have Not Been a Deterrent
The well-worn narrative of high interest rates as a deterrent to buying hasn’t been the case with investors. According to Scotsman Guide and Cotality, there are several reasons for this:
- Many investors are buying with cash after years of increased equity and sound investing. They can afford to cherry-pick deals amid decreased competition.
- Debt service coverage ratio (DSCR) loans enable investors to purchase homes at more favorable rates than homeowners, basing their purchases on rental income.
- High purchase prices have translated into high rents, allowing investors to offset an increased sticker price with rental income.
Why Investors Should Buy Now
The market is looking more favorable for investors to enter. Here are three reasons to get your feet wet now.
1. Traditional buyers may soon return to the market
Prevaricating about buying an investment is only likely to allow the competition to catch up once rates fall. Currently, traditional homebuyers and sellers are experiencing a standoff due to higher rates and the lock-in effect that prevents existing homeowners from listing their residences. With rates expected to fall, buying in anticipation of further rate cuts could be a prescient move.
2. Rental demand remains strong
In recent years, potential buyers have become long-term renters, and as a result, their households have expanded. According to the Scotsman Guide, between Q1 and Q2 2025, renters experienced a 2.6% growth in their households, while homeowner households declined by a marginal 0.1%. Increased rental demand means a need for more supply, favoring investors.
3. Big investors are betting heavily on rental real estate
Wall Street generally doesn’t make a move without commissioning a slew of surveys and reports, and they have decided that rental real estate is a surefire bet.
In August, the Carlyle Group, a private equity behemoth, raised $9 billion for real estate investments. They are not the only ones.
National apartment REIT AvalonBay Communities has bought 126 townhomes in Texas for $49 million, and plans to invest an additional $1 billion in build-to-rent (BTR) properties. Blackstone, Invitation Homes, and Pretium Partners are all aggressively expanding their footprint. JPMorgan has also entered the in-demand BTR space, launching a new firm with Paran Homes and Georgia Capital, according to CRE Daily.
However, there has been a backlash against Wall Street’s practice of buying residential homes for rental purposes, which leaves fewer homes available for would-be homebuyers and contributes to the housing crisis. New York Governor Kathy Hochul has proposed legislation that restricts hedge funds from buying large volumes of single-family homes, leaving the field open to smaller investors. In a January statement, she said, “Shadowy private equity giants are buying up the housing supply in communities across New York, leaving everyday homebuyers with fewer and fewer affordable options.”
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Final Thoughts
Despite headlines regarding Wall Street’s mass purchasing of residential rentals, mom-and-pop investors remain the largest demographic of residential investment property owners, contributing roughly 20% of the nation’s 86 million single-family homes and townhouses, according to BatchData, whereas institutional investors account for 2.2%.
Smaller investors need to be opportunists to stack their portfolios without incurring too much risk. The rental market is presenting them with increased buying opportunities due to the lack of competition from traditional buyers. However, the winds of change are in the air, and the Federal Reserve’s first rate cut in almost a year could signal the start of more to come.
Mortgage rates are currently at their lowest level in nearly a year. As a result, some buyers have started to return, contributing to August’s three-year high for home sales. The advantage of buying at the top of a rate-cutting cycle is that a refinance opportunity awaits once the cycle ends.
