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Ron Levine/Getty Images August 15, 2022 Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters. Bankrate logo

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You have money questions. Bankrate has answers. Our experts have been helping you master your money for over four decades. We continually strive to provide consumers with the expert advice and tools needed to succeed throughout life’s financial journey. Bankrate follows a strict , so you can trust that our content is honest and accurate. Our award-winning editors and reporters create honest and accurate content to help you make the right financial decisions. The content created by our editorial staff is objective, factual, and not influenced by our advertisers. We’re transparent about how we are able to bring quality content, competitive rates, and useful tools to you by explaining how we make money. Bankrate.com is an independent, advertising-supported publisher and comparison service. We are compensated in exchange for placement of sponsored products and, services, or by you clicking on certain links posted on our site. Therefore, this compensation may impact how, where and in what order products appear within listing categories. Other factors, such as our own proprietary website rules and whether a product is offered in your area or at your self-selected credit score range can also impact how and where products appear on this site. While we strive to provide a wide range offers, Bankrate does not include information about every financial or credit product or service. The concept of investing might make you think of buying and selling stocks and bonds. However, you can also invest by purchasing an , whether you plan to rent it out for a long time or fix it up to sell for a quick profit. As you compare options to , read on for information that can help guide your decisions.

2022 investment property statistics and tips

Lightbulb There are 19.95 million rental properties in the U.S. containing 48.2 million rental units, according to . About 70 percent of rental properties are owned by individual investors, according to Census estimates. For-profit corporations own around 18 percent of rental properties, but 45 percent of all units, Census estimates show. Three-quarters (75.3 percent) of investment properties purchased in the fourth quarter of 2021 were paid for in all cash, according to an . Lack of supply and rising prices are the two biggest challenges for residential real estate investors in 2022, according to a . Around 34 percent of households live in rental housing, according to . Forty-two percent of those live in single-family homes, while 36 percent live in apartments with five or more units. Almost half (47 percent) of renters are under 30 years old. The surpassed $2,000 in June 2022, according to . The most expensive rental market in the U.S. as of June 2022 is San Jose, California, with a monthly rent of $3,361, according to Zillow. The least expensive is Youngstown, Ohio, at $960. Sixteen percent of renters were behind on rent payments as of May 2022, according to the . While plenty of headlines have focused on corporations buying houses, the vast majority of real estate investors are much smaller operations, says Charles Tassell, chief operating officer of the National Real Estate Investors Association. Most of the organization’s members own between 14 and 40 units. Regardless of how many properties in their portfolio, though, investors are keeping a close eye on a potential shift in the market. “The uncertainty of the near future reminds a lot of people of that period between 2008 and 2010,” says Tassell. “Some investors are determining how leveraged they can get while still feeling comfortable. We are seeing a lot more people take a more cautious approach.” No question about it: Earning through an investment property takes money and work. “Any property that is not owner-occupied is considered more risky to a lender because homeowners that occupy a property will tend to care for the maintenance and upkeep to a higher degree,” says Staci Titsworth, senior vice president at . Generally, property owners budget 1 percent of the property’s value for annual maintenance. So, if your rental is valued at $250,000, say, plan to spend $2,500 a year in upkeep. Unlike a mortgage for an owner-occupied home, you’ll also need a sizable down payment, such as 15 percent or 20 percent, sourced from your own accounts. “The client needs to utilize their own funds toward down payment and cannot obtain gift monies, which are accepted for owner-occupied loans,” says Titsworth. Additionally, you’ll need to factor in the cost of a potential for a gap in tenants. Just under 6 percent of rental units were vacant as of the first quarter of 2022, according to Census figures. If you plan to buy and hold versus fix and flip (more information on that below), consider whether you’d go the route in the future, as well. “Rent-to-owns can be really good for a more senior investor looking to sell off parts of their portfolio over time while minimizing taxes,” says Tassell, “providing both tax-beneficial cash flow and an exit strategy from the properties.”

2022 buy and hold real estate statistics

Lightbulb Between June 2020 and June 2021, home prices appreciated by more than 18 percent, according to . Over the next year, however, appreciation is poised to slow dramatically, with CoreLogic forecasting a pullback to 4.3 percent. In 2022, profits on three-bedroom, single-family home rentals are decreasing in 72 percent of counties in the U.S., according to . The average rent rose by 14.8 percent year-over-year as of June 2022, according to Zillow. Instead of looking for an immediate profit from a fix-and-flip property, many real estate investors opt to keep those homes, commonly referred to as buy-and-hold investing. For example, an investor might buy a three-unit building with plans to fill each home with tenants. Rather than selling it, the investor benefits from a a steady stream of rental income, either from monthly tenants or short-term vacation guests. Ideally, the goal is to have the property generate income and also appreciate in value.

2022 flipping and renovation statistics

Lightbulb More than 323,400 properties were flipped in 2021, according to , with 60 percent of those purchased with all cash. It took the average investor 153 days, or about five months, to complete fix-and-flip projects in 2021, according to ATTOM Data Solutions. The median gross profit on a flip as of the fourth quarter of 2021 is $65,000, according to ATTOM Data Solutions. If you plan to , know that it’s getting increasingly challenging, particularly due to rising costs of renovation materials and labor, says Tassell. With this strategy, you’ll likely need to obtain a or some other creative financing. “Most investors are actually working with hard money loans or their own capital before going to the bank after renovations and seeking a longer-term loan to lock in, and get their cash back, for the next project,” says Tassell.

Investment property FAQ

How do you buy an investment property

You can pay all cash or take out a mortgage to buy an investment property. Qualifying for an investment property loan is more challenging than qualifying for a mortgage for your own home. Investment property lenders typically want to see excellent credit and a sizable down payment.

Can you buy an investment property with no money down

Most mortgages for investment properties require a larger down payment — often 20 percent or more — than a loan for a home you’re going to live in. Even if you’re a member of the military and qualify for a no-money down VA loan, you can’t use that to buy an investment property, unless you plan to buy a multi-family property and live in one of the units as your primary residence. However, there are creative ways to come up with the down payment money that might not involve actually saving up all the cash. For example, you might be able to take out a against your principal residence and use those funds for your down payment, or do a to come up with the funds. You’ll be paying interest, though, so do the math to make sure this kind of move makes sense for you.

Where should you buy an investment property

As with any investment, it’s important to assess the opportunity. It’s best to search for investment properties in an area that’s poised for growth. Look at net migration data to determine which cities are attracting more residents, for example — as the population increases, those newcomers will be looking for housing.

How do you measure return on an investment property

While some investors might consider the capitalization (cap) rate on a property to gauge returns, there are other factors you should keep in mind, especially if looking to invest in a single-family rental. “Single-family homes are not typically purchased on a cap rate formula,” says Tassell. “Knowing the community, current rents and the numerous other variables such as future demand have a far greater impact on the evaluation, and ultimately the final valuation. Cap rate perspectives are extremely regionally-sensitive and are more the function of brokers than actual buyers.” SHARE: Suzanne De Vita is the mortgage editor for Bankrate, focusing on mortgage and real estate topics for homebuyers, homeowners, investors and renters.

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