Early in the pandemic, it felt like every other headline was about real estate investors scooping up homes. Low rates, rising rents, and tons of inventory turned virtually any property into a hot commodity. Fast-forward to today, and the landscape looks different: higher mortgage rates, stubbornly elevated prices, and limited inventory. So, is now a good time to buy your first — or another — investment property? Let’s look at how today’s market stacks up for investors of every ilk.
How real estate investing has changed since 2020
The days of ultra-low real estate costs rest firmly in the past. And while we likely won’t see the sub-3% mortgage rates of 2021 anytime soon, rates are far from their highest — a staggering 16.63% in 1981.
Additionally, home prices continue to rise, although not at the skyrocketing rates seen in 2021. This combination of higher rates and prices has thinned out the pool of buyers in many markets and made deals harder for investors to find. At the same time, demand for rental homes is growing.
However, if you’re considering waiting out either of those factors to invest in real estate in fairer weather, that could prove a losing strategy.
“We don’t anticipate housing prices or rates to dramatically decline anytime soon,” Tim Lawlor, CFO at the real estate investing lender Kiavi, said in an email interview. “Those wanting to invest in rental properties likely won’t see a significant benefit to waiting.”
In other words, today’s market requires sharper pencils, not more patience. Let’s dive into that idea in more detail.
The case for investing now
For a deal to make sense in today’s market, Lawlor said it needs to “pencil out” — that is, it needs to make financial sense on paper from the jump.
“Investors should consider all costs associated with rental property when doing their deal analysis,” said Lawlor. “This includes borrowing costs plus insurance costs, repair and maintenance costs, marketing costs … along with an analysis of local market rent prices.”
If the property can still provide positive cash flow when adding up all of those factors, it could be a wise investment. However, don’t forget to figure in the occasional vacancy. The best residential real estate investments today are those that put cash in your pocket from day one and prove profitable despite the occasional month without a tenant in place.
Here’s a simple example: Say a property rents for $2,500 per month. Your mortgage is $1,800, and you budget $400 monthly for repairs, insurance, and taxes. On paper, that gives you $300 in positive cash flow each month. However, a more realistic analysis sets aside money for vacancy — say one month annually without a tenant (-$2,500). If you divide that vacancy cost by 12 months, that removes roughly $210 of rental income per month. Now, your actual cash flow is closer to $90 monthly.
That slim margin might not sound appealing, but in today’s higher cost market, even a conservative positive number could prove a worthy investment, especially if rents continue to rise and you anticipate refinancing your mortgage to secure a lower rate in the future.
Looming risk in today’s (and any) real estate market
While numbers on a spreadsheet might look good, David Schneider, president of Schneider Wealth Strategies, pointed to another key factor in the investment property world: people.
“The biggest risk for landlords is a lousy tenant,” Schneider said in an email interview. Late rent, property damage, and tough eviction laws can quickly erase returns.
To put that in perspective, let’s say you’re counting on the $2,500 in rent mentioned above. If your tenant stops paying and it takes three months to remove them, that’s $7,500 in lost income, not to mention legal costs and potential repairs. One bad tenant can wipe out a year’s profits or more in a single go.
Beyond tenants, higher insurance premiums or a sudden $10,000 roof replacement can instantly turn a penciled-out deal upside down. “If a deal doesn’t make sense at current rates, pass,” Schneider said. Having a cushion built into your analyses can keep surprises from becoming catastrophes.
What first-time investors should know
For new real estate investors, the biggest hurdle isn’t just buying property — it’s being ready for everything once they leave the closing table. Schneider warned that many first-timers underestimate the day-to-day demands of being a landlord. Screening tenants, budgeting for vacancies, and knowing local rental laws are just as important as finding the right property.
Schneider recommended stress-testing your numbers. If a property only works under perfect conditions, it might not be the right choice for the first property in your portfolio. He also suggested that new investors be realistic about “lifestyle fit” — that is, how involved they want to be with the property.
Are you comfortable handling “tenants, toilets, and trash” yourself, or does hiring a property manager make more sense? Outsourcing comes at a cost, but it can help you avoid burnout from property upkeep that you may struggle to oversee.
What repeat investors should consider
If you’re looking to add a new property to your existing portfolio in today’s market, you have a different playbook in 2025 and heading into 2026. Instead of relying on traditional listings, Lawlor said you’ll likely want to hunt for off-market deals through wholesalers or personal networks, noting this shift is mainly due to tight supply.
He also highlighted that seasoned real estate investors may want to consider regions with relatively low purchase prices and steady rental demand for strong yields — notably, the Midwest. That combination can provide more predictable returns than chasing hotter, higher-priced markets.
Repeat investors can also consider diversifying the types of homes they invest in by adding single-family rentals, small multifamily buildings, or even mixed-use properties to their portfolios. Each type of dwelling has its own risk profile, but expanding beyond one category can provide stability should markets shift.
Finally, investors who already have equity in other properties may also find creative ways to leverage it to invest in new deals, whether through refinancing their mortgage, taking out a home equity loan, or using tax-advantaged strategies such as 1031 exchanges.
Pre-purchase tips for investors
Whether you're new or experienced with real estate investing in 2025, a few fundamentals can help you make smarter decisions in this challenging market.
Crunch the full costs
Look beyond mortgage payments to include closing costs, taxes, insurance, repairs, utilities, and vacancy allowances. Hidden expenses such as homeowners' association dues can easily tip a deal from profitable to precarious.
Be strategic about markets
In pricier coastal cities, the math often doesn’t work well for first-time investors. Instead, consider a nationwide search for a favorable market where you can strike a balance between purchase price and market rents.
Plan for management
Decide early whether you’ll be a hands-on landlord or outsource to a property manager. If you go the DIY route, line up reliable contractors before you need them.
Build a cash reserve
Having three to six months of expenses set aside can help keep you afloat if a tenant suddenly moves out or a costly repair comes calling.
Think long-term
Schneider noted that real estate is rarely a quick win; patience and planning are critical. The payoff typically occurs after years of steady rent growth and loan repayment.
Leverage tools
From rent calculators to After Repair Value (ARV) estimators, online resources can help you evaluate deals more accurately. Lawlor mentioned that Kiavi offers a free ARV calculator to help investors quickly crunch numbers before buying a property.
Buying real estate properties today FAQs
Is it wise to invest in real estate right now?
It depends on the deal. If a property covers its costs — mortgage, property taxes, insurance, repairs — and still generates income, now may be a good time to invest. Experts warn against waiting for a market shift, since prices and rates may not move much in the near future.
How long should you hold an investment property?
It depends on your situation, but many investors aim to hold an investment property for five to seven years or longer. The key to the ideal holding period is for the property to prove profitable and remain attractive for a new investor or homeowner. This means that the property should turn a profit at current market rates, be in a condition appealing to both investors and consumers, and provide you with a decent return on your investment at the closing table.
What’s the biggest risk for first-time real estate investors?
Tenant trouble tops the list for first-time real estate investors. A renter who doesn’t pay or damages the property can quickly turn a profitable deal into a loss. Careful tenant screening, realistic budgeting, and knowing local tenancy laws can help first-time investors avoid costly missteps.
Read more at Yahoo Finance
Related Links
Why Experts Say Mortgage Rates Should Ease Over the Next Year
6 Things Real Estate Agents Say You Should Always Fix Before Selling Your Home
Closing Costs Unpacked: State-by-State Breakdowns for Today’s Buyers
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