During the Pandemic Housing Boom, surging demand fueled by low mortgage rates and remote work flexibility caused active inventory levels to drop sharply nationwide. Builders couldn’t keep up, and active inventory for sale was drained by red-hot demand, leaving markets with historically low supply. Analysts at LendingOne believe that a key indicator to watch throughout 2025 is regional active inventory levels relative to pre-pandemic levels in 2019. Markets where active inventory is furthest below pre-pandemic levels are likely to remain strong, with sellers retaining the upper hand. Conversely, in markets where active inventory significantly exceeds pre-pandemic levels, housing markets are expected to be softer, with weaker pricing momentum—offering investors and buyers increased leverage. To identify the nation’s 10 strongest and 10 weakest housing markets of 2025, LendingOne compared current active inventory levels to those of the same month in 2019. The analysis also incorporated year-over-year inventory growth, year-over-year home price shifts, and the three-year change in median days on market. In total, we examined the nation’s 250 largest metro area housing markets.   LendingOne’s Topline Findings: A number of small and mid-sized metros in the Northeast and Midwest lead the list of the strongest housing markets in 2025. These markets are driven by persistently low active inventory levels and greater affordability compared to many other regions in the country. In contrast, several Southern markets, including many in Florida and Texas, rank among the weakest and softest housing markets currently, offering homebuyers and investors some leverage. These markets have seen a significant inventory increase and cooling demand. The 10 Strongest U.S. Housing Markets in 2025 These are the 10 strongest markets to start 2025: Erie, PA Rockford, IL  Bloomington, IL Manchester, NH Hartford, CT Binghamton, NY Rochester, NY Norwich, CT Albany, NY Atlantic City, NJ According to LendingOne’s analysis, the strongest housing markets in 2025 are characterized by a combination of rising home prices, limited active inventory, and fast property turnover. These qualities signal potential for price appreciation, rental income growth, and sustained market expansion in the coming year.  Northeastern and Midwestern metros dominate this list. Compared to high-cost coastal or Sunbelt markets, homes in these regions remain more affordable, attracting first-time buyers, downsizers, and remote workers seeking budget-friendly housing.  Several cities at the top of LendingOne’s ranking fit this description, including Rockford, Illinois, less than 100 miles from Chicago, as well as Hartford and Norwich, Connecticut, and Atlantic City, New Jersey, which serve as commuter hubs for New York City. A lack of homebuilding in Midwest markets like Rockford, IL, and Northeast markets like Manchester, NH, further contributes to the tightness of these markets. Without significant pressure from homebuilders offering mortgage rate buydowns to boost sales in this affordability-challenged environment, existing home sellers across much of the Northeast and Midwest remain just about the only option for buyers.   The 10 Weakest U.S. Housing Markets in 2025 These are the 10 weakest markets to start 2025: Punta Gorda, FL  Cape Coral, FL Huntsville, AL Lakeland, FL Killeen, TX Palm Bay, FL Lubbock, TX Colorado Springs, CO Naples, FL Ocala, FL Florida stands out as the home state of many of the weakest markets in 2025. This is largely due to high active inventory levels, as the state is grappling with unabsorbed new supply from a construction frenzy that followed the Pandemic Housing Boom and a pullback in housing demand. Many Florida markets heavily rely on home buyers who are moving to the region or are purchasing a second home. Sky-high condo HOA fees, rising property taxes, and soaring insurance premiums—exacerbated by a high risk of extreme weather-related damage—have priced out would-be buyers in many markets in Florida.  Not to mention, Florida’s condo market is feeling the aftereffects of regulations passed following the Surfside condo collapse in 2021. As a result, home price growth in many Florida housing markets is significantly weaker than a few years ago. Indeed, from November 2023 to November 2024, home prices fell -7.8% and -5.9% in Punta Gorda and Cape Coral respectively, according to LendingOne’s analysis. Big Picture The strongest U.S. housing markets heading into 2025 are small and mid-sized metro areas in the Northeast and Midwest, where tight inventory and strong demand drive home price growth. Meanwhile, high inventory levels and cooling demand are weighing down or softening many Southern housing markets.

The real estate investment landscape is looking brighter and more promising as 2025 begins. Following a period of significant changes resulting from the pandemic, real estate investors are now benefiting from more stabilized borrowing costs and a clearer economic outlook. As the housing market steadies and for-sale inventory returns to normal levels, we expect more favorable buying opportunities to emerge in some markets. While investors haven’t seen the significant pullback in mortgage rates many had hoped for when the Federal Reserve began its rate-cutting cycle, several factors are coming together that could make 2025 a year of opportunity for investors. Here are a few things to know as the 2025 housing market kicks off. Election Uncertainty Is Behind Us—and It’s Fueling Momentum Uncertainty surrounding elections can significantly impact major capital and investment decisions. We saw a build-up of decisions that did not happen for a few months leading up to the election. There’s always going to be a psychological component to the housing sector and our investors were seeking more certainty on housing, interest rates, and economic policies. With the political landscape now more transparent, we’re seeing a first-hand tangible uptick in deal-making and long-term planning. While there’s still uncertainty surrounding the 2025 fiscal policy agendas, some investors who had delayed decisions last year are jumping back into the market. Improving Investor Sentiment Among single-family investors we surveyed in Q4 2024, 76% say they are either “very likely” (55%) or “somewhat likely” (21%) to buy at least one investment property in 2025. This marks improving investor confidence: In our Q3 2024 survey, just 60% of single-family investors said they were “very likely” (38%) or “somewhat likely” (22%) to buy at least one investment property in the next 12 months. While single-family investors may not be overly bullish, they are cautiously optimistic. 76% expect at least mild home price appreciation in their local market in 2025, and 84% plan to raise single-family rents this year. Inventory Is on the Rise Total active listings for sale are beginning to rebound in certain parts of the country, even as new listings remain subdued. Much of this rise in active inventory has been concentrated in the Southwest and Southeast, areas that experienced significant demand during the pandemic housing boom. As active inventory climbs, investor buyers in these regions gain some negotiating power. Analysts at LendingOne expect year-over-year growth in U.S. active inventory to continue in 2025. It might not be a big inventory jump, but it will help move housing into a more balanced market. Big Picture As the U.S. housing market evolves in early 2025, I expect investment activity to rise and investors to adapt to the changing market. Institutional and retail investors are recalibrating to meet the demands of a market characterized by stabilized interest rates and normalizing inventory. While challenges persist, particularly around affordability and supply, opportunities are available for those with more value-added strategies. Inventory and days on the market of properties requiring renovation have increased, which is positive for real estate investors going into the year.

The 2025 outlook for single-family investors is cautiously optimistic about rental demand, rent growth, price appreciation, but it’s tempered by concerns over rising costs and interest rates. Overall the good news is, investors are more optimistic and plan to purchase more than just last quarter. Single-family rental investors appear poised to navigate these dynamics with a focus on strategic acquisitions and market adaptability. In this article, you’ll see the full results of our fourth quarter LendingOne-ResiClub Single-Family Rental Investor Survey. Investors who own at least one single-family investment property were eligible to respond to the LendingOne-ResiClub SFR Investor Survey, fielded between November 14 and November 26. ResiClub, our partner for the survey, is a news and research outlet dedicated to covering the U.S. housing market. “We have found that clients have resumed making decisions after the election and focused on their acquisition strategies for 2025,” says LendingOne CEO Matthew Neisser. “They are more likely to add to their portfolio compared to last year primarily because they are bullish on rental demand, driven by a continued lack of rental inventory.  As the housing market steadies and for-sale inventory returns to normal levels, we expect more favorable buying opportunities to emerge in some markets. At the same time, investors should temper expectations for outsized rent increases like 2021-22 and focus on sustainable, data-driven investment strategies to maximize long-term returns.    Topline Findings 1. Investor Sentiment and Intent Purchase Intent: 76% of single-family investors plan to buy at least one property in 2025. Sale Intent:  33% of single-family investors plan to sell at least one property in 2025. Market Outlook: 87% predict strong rental demand in 2025. 76% expect positive home price appreciation in 2025. 40% expect mortgage rates to be below 6% by the end of 2025. 2. Financial Considerations Rising Costs: 58% of investors were impacted by rising home insurance premiums. 37% identified home insurance as their biggest increased expense in 2024. Rental Income: 84% plan to raise rents in 2025, with 40% expecting increases over 4%. 3. Regional Trends Southeast and Southwest: These regions experienced the highest impact from rising home insurance premiums. Investor Confidence Rises  Back when we surveyed single-family investors in July, when mortgage rates were slightly higher than today, 60% said they were either “very likely” (38%) or “somewhat likely” (22%) to buy over the next 12 months. In our latest survey, fielded late last month, 76% of single-family investors say they are either “very likely” (55%) or “somewhat likely” (21%) to buy at least one investment property in 2025. Simply put, investors are feeling a bit more confident as we approach 2025. “The survey results highlight both the resilience and adaptability of single-family investors as they look ahead to 2025,” Matthew Neisser continued. “Strong rental demand and mild expectations for rent growth underscore the opportunities in this space, but rising costs—especially insurance—and a divided outlook on mortgage rates remind us that careful planning will be key.”   Investment Plans and Strategies   How likely single-family rental investors say they are to buy another investment property in the next 12 month   How likely single-family rental investors say they are to buy another investment property in calendar year 2025   How likely single-family rental investors say they are to sell any of their investment properties in calendar year 2025   How single-family rental investors define their primary investment strategy Market Conditions and Trends   How single-family rental investors describe home price momentum in their primary investment market in 2024   How single-family rental investors expect home prices to shift in their primary rental markets in calendar year 2025   What single-family rental investors expect the average 30-year fixed mortgage rate to be at the end of 2025     Rental Demand and Pricing   How single-family rental investors describe rental demand in their primary investment markets in 2024   How single-family rental investors expect rental demand to be in their primary investment markets in 2025 How much single-family rental investors plan to raise rents in calendar year 2025   Financial Impact and Expenses   How single-family rental investors say rising home insurance premiums impacted their cash flow in 2024

Over the past few years, U.S. housing affordability has significantly worsened. The aftermath of the Pandemic Housing Boom saw home prices soaring, mortgage rates more than doubled, and the cost of repairs, insurance, and property taxes also shot up. That’s all led to fewer people being able to afford to buy homes, and as a result, homeownership has decreased in some markets. With higher financial barriers to buying a home, in many markets, a larger share of households have turned to renting instead. This bump in rental demand presents potential opportunities for real estate investors, particularly in metros where renting has become more prevalent. To see which markets are more primed for investor activity, LendingOne analyzed year-over-year changes in the rental share of housing units—or “rentership”— across the 75 largest metros by population. LendingOne’s Topline Findings: 47 of the largest 75 U.S. metros saw year-over-year growth in their rental share. Renting remains the most popular in the most expensive housing markets, namely San Jose, Los Angeles, and New York City The metro areas that made the biggest year-over-year rental share gains were Toledo, Cape Coral, and Minneapolis.  Top Five Metros with the Most Rentership Growth Year-Over-Year:   Toledo, OH (+8.7 percentage points) Cape Coral-Fort Myers, FL (+8.5 percentage points) Jacksonville, FL (+7.7 percentage points) Minneapolis-St. Paul-Bloomington, MN-WI (+7.7 percentage points) Portland-Vancouver-Hillsboro, OR-WA (+7.0 percentage points) Annual Shift in the Share of Local Households that are Renters Population Growth and Housing Trends In general, most markets see both the number of homeowners and the number of renters increase over time as the overall population ticks up. However, if the pace of renter household formation significantly outpaces owner household formation, then that could indicate a deterioration in home affordability in that region.  Affordability Pressures in Growing Renter Households While populations tend to grow across both renters and homeowners, when renter household formation significantly outpaces owner household formation, it signals that home affordability is deteriorating. In metros like Toledo and Cleveland, home prices have outpaced wage growth, making homeownership increasingly difficult.  In places like Jacksonville and Cape Coral, soaring home insurance premiums and condo HOA fees are pricing out many would-be buyers, causing the share of renters to rise.  Consistent Trends in High-Rental-Share Metros Despite these shifts, the metros with the highest rental shares remain largely consistent, reflecting long-standing trends in affordability. The most expensive markets, with limited housing supply, tend to have the highest rental share. Meanwhile, more affordable areas with room for new development typically see lower rentership rates and higher homeownership. Five metros with the largest rental share in Q3 2024: San Jose-Sunnyvale-Santa Clara, CA (52.0%) Los Angeles-Long Beach-Anaheim, CA (50.8%) New York-Newark-Jersey City, NY-NJ-PA (49.1%) San Diego-Carlsbad, CA (48.0%) Fresno, CA (47.4%) Five metros with the smallest rental share in Q3 2024: Cape Coral-Fort Myers, FL (21.8%) Charleston-North Charleston-Summerville, SC (23.7%) Columbia, SC (24.5%) Allentown-Bethlehem-Easton, PA-NJ (27.2%) Detroit-Warren-Dearborn, MI (28.2%) Share of Local Households that are Renters Big Picture: As housing affordability conditions worsened over the past few years, the share of renting households has ticked up a bit in some markets, creating opportunities for investors.

If you’re getting started as a real estate investor, you may have heard about the BRRRR method. BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat and is a popular five-step investment strategy. The BRRRR method involves purchasing distressed or undervalued properties, renovating/rehabbing them, and renting them to tenants. Once rehabbed and rented, the property gains value, which the investor can leverage to refinance, using that money to purchase another property so they can repeat the process. Let’s dive into each step of the process and talk about the advantages, challenges, and financing options investors should know before getting started.   What is the BRRRR Method? One of the prerequisites to the BRRRR strategy is that the property is purchased below market value. This is an essential component, as you’ll need to build enough equity to recover your original investment quickly. Here are some points to consider in each step in the BRRRR method:   Buy Step 1 in the BRRRR method is Buy. You’ll need to identify a suitable property first. Ideally, it will be one that requires some upgrades but still has desirable qualities that make it worth the investment. Potential is key! A distressed property in a great location is one example, or perhaps a building that’s under foreclosure or bank-owned. Be sure to conduct a thorough inspection before you commit. A good rule of thumb is not to purchase any property for more than 70% of its post-rehab value. That gives you a 30% buffer for repairs, and you’ll still have enough equity for a refi when you’re done. This is occasionally called the 70% rule or the maximum allowable offer (MAO). MAO is the maximum you can pay upfront and still make a profit. Other metrics investors typically use to evaluate deals include the after-repair value (ARV). You can estimate this amount by adding the added value from the repair to the purchase price or by looking at similar properties in the area to gauge the fair market value. So, for example, if your ARV is $750,000, your MAO is $525,000. Rehab Once the deal is completed, it is time to start on step 2 of the BRRRR method: rehabbing the property, upgrading, and repairing it so it’s ready for tenants. Upgrades could be purely cosmetic or more extensive, but the ultimate goal is to make it a desirable place to rent. Choose your upgrades based on what will give you the most bang for your buck. Updating bathrooms and kitchens, finishing basements, new paint, and refinishing floors are just a few examples. Rent When your property is ready to occupy, you’ll move on to step 3 in the BRRRR process: finding suitable tenants.  Rental income covers your expenses, so do your due diligence to ensure they will make good tenants who will stay long-term. The rent should be enough to cover your mortgage payments with some profit on top of it. Keep your property maintained, be a responsive landlord, and keep the lines of communication open. Refinance Once your property is occupied and income-generating, it’s time to refinance. In step 4 of the BRRRR process, you’ll want to use the equity you’ve built in the property as collateral, and pull out of your initial investment plus whatever additional equity there is so you can repeat the process with a new property. You’ll need to have owned the property for a minimum period before you can refinance, replacing the existing mortgage with a new one at more favorable terms. In the case of a cash-out mortgage, the refinanced amount will be more than what’s owed, and you will receive the balance in cash. Repeat The fifth and final step in the BRRRR method is to use the funds you received through your refinance to go back to step 1 and start the process over again. The goal is to keep repeating this same strategy as you build out your overall portfolio for more profit and better returns.   Advantages of BRRRR for Investors The BRRRR method is an excellent way for investors to scale their portfolios—as long as the variables are in your favor. The main benefits of the BRRRR method are: Requires minimal investment. If the property is undervalued enough and you can do most of the rehab work yourself, there is massive profit potential. High ROI. Depending on what you paid for the property, there’s excellent potential for generating a high return on your investment over time. Easily scalable. The steps are easy to follow, and if your first property was a success, you’ll have learned from the process and will know what you’re facing for future investments. Great passive income potential. If you find great tenants, you’re in a good position to achieve steady cash flow. Equity building. As you build equity through the rehab process, you could net better interest rates, lower payments, and more buying power that you can leverage into new investments.   Challenges of the BRRRR Method Sometimes, it isn’t so easy to lock into the right circumstances with BRRRR. Here are some of the challenges you could face. Finding the right property isn’t always easy. The success of your BRRRR strategy hinges on purchasing the right property at the right price. Careful evaluation is essential to ensure your efforts and investment are worthwhile. It’s speculative. There’s always a chance you won’t find suitable tenants, or the property won’t gain value, putting your investment at risk. It’s hard work. Managing rental properties isn’t for everyone. It can be extremely time-consuming and stressful, especially with multiple properties or tenants. All the pieces need to be in place to ensure success. High up-front costs. You’ll need to ensure you can cover the down payment, renovation costs, and operating expenses until the property is income-generating, which could be a barrier for some investors.   Financing Options for the BRRRR Strategy You have a few options for financing your BRRRR strategy, but a fix to rent loan is recommended as it is tailor-made for BRRRR. Fix to Rent loans are essentially two loans in one. Investors start with a fix and flip loan that covers both the purchase and repair costs of the property. Once the rehab is complete and the investor is ready to rent the property long-term, you have the option to roll into a 30-year fixed-rate rental loan. Working with the same lender when you are ready for the refinance can prove beneficial as they already have your documents on file, you are familiar with your loan advisor, and they may offer incentives for continuing to work with them. Ultimately, this is a fast and simple solution for investors looking to purchase income properties they intend to own long-term, which goes to the heart of BRRRR. Speak to a loan advisor to see if you qualify for a fix-to-rent loan.   Final Thoughts on BRRRR Real estate investing is an excellent way to build wealth and equity, and the BRRRR method may be what you need to achieve your investment goals. Choosing the right financing partner is critical, as success hinges on the right rates and terms. The qualified lending advisors at LendingOne will work with you to ensure you have the best financing vehicles to get you where you want to be. Contact us today, or take a moment to request a quote. We specialize in real estate investment loans and are here to help. 

This week, LendingOne analysts researched county-level home insurance premium data to determine how premiums vary for homeowners and single-family investors nationwide. Key Findings: A Surge in Home Insurance Premiums Among the largest 500 U.S. counties, more than half (256) saw their median annual home insurance premiums increase by 25% or more from 2020 to 2023.  Home insurance premiums are highest in coastal Florida counties at-risk for severe climate events Home insurance premiums are the lowest in more affordable regions, such as counties in Pennsylvania and Maine, which also have lower risk for climate-related damage Counties with the Highest Home Insurance Premiums in 2023 Among the 500 largest counties, these five had the highest median annual insurance premiums in 2023. Monroe County, FL → $7,608  New York County, NY → $7,148 Broward County, FL → $5,575 Orleans Parish, LA → $5,546 Miami-Dade County, FL → $5,444 Counties with the Lowest Home Insurance Premiums in 2023 Among the 500 largest counties, these five had the lowest median annual insurance premiums in 2023. Penobscot County, ME →  $887 Washington County, ME → $898 Erie County, PA → $949 Beaver County, PA → $1,004 Westmoreland County, PA → $1,015 Median Annual Home Insurance Premium in 2023 The Impact of Climate Risk on Home Insurance Premiums Home insurance premiums tend to be higher in areas prone to climate-related damage. So, it’s unsurprising that insurance premiums remain highest along the Southeast coast, where homes can see significant damage from tropical storms and hurricanes. However, premiums are also high in central states like Oklahoma, Nebraska, Colorado, and Texas, due to damage caused by wind, thunderstorms, wildfires, and tornados.  Alternatively, rural, more affordable counties with less severe climate risk—mostly across the Midwest and Northeast—see the lowest median annual insurance premiums.  Pandemic Housing Boom and Insurance Costs But high insurance costs aren’t just due to climate risk. Home prices and construction costs skyrocketed during the Pandemic Housing Boom, and with them, the cost of home repairs and renovations also rose. This prompted insurance companies to raise premiums to keep up with elevated replacement costs. LendingOne analysts found that 55 of the nation’s 3,000 plus counties saw their median insurance premiums more than 100% in three years.  Counties with the Largest Premium Increases (2020-2023) Among the 500 largest counties, these five counties saw their median annual insurance premiums grow the most from 2020 to 2023: Prince William County, VA: +150.1% St. Tammany Parish, LA: +117.8% Cook County MN: +104.8% Oneida County ID: +95.2% Calcasieu Parish LA: +90.8% Change in Median Annual Home Insurance Premium from 2020 to 2023   A lot of the biggest jumps in median annual insurance premiums happened in Florida and Louisiana. Those two states have high hurricane risk, of course.  Big Picture: Home insurance premiums have spiked across much of the country, and in some markets, particularly in Louisiana and Florida, they have cut into single-family landlords’ cash flow.

If you’re a landlord or considering purchasing a rental income property, consider a debt service coverage ratio (DSCR) loan to fund your next purchase. DSCR loans are specifically designed to finance rental properties and can be easier to qualify for than a conventional mortgage as they leverage the property’s cash flow instead of a buyer’s income, tax returns, and W2. Today’s article will cover the finer points of DSCR loans, DSCR loan requirements, how to qualify, and their flexibility for real estate investors. What is a DSCR Loan? DSCR loans are specific to residential income-producing properties and are fast becoming the preferred option for income property buyers. DSCR loans are mortgages secured by the property’s rental income and do not require the buyer to provide the same documentation needed with a mortgage for owner-occupied properties. This feature is especially helpful for self-employed investors who may not have a conventional income stream or have been challenged to obtain financing through traditional banks. Some things to note about DSRC loans: Only properties with one to four units are eligible for DSRC lending, as additional units in the building would classify it as “multi-family.” DSCR eligibility assumes the property is turnkey, meaning it requires no renovation or upgrades and is move-in ready or has an established, reliable tenant. Lastly, the property must be a business asset or income investment, meaning the owner cannot reside at the address. How DSCR Loans Are Calculated DSCR loans are based on a calculation that assesses the potential for the property to cover its expenses. The calculation divides the property’s net operating income (NOI) by its total debt service (TDS) to obtain a number less than, greater than, or equal to 1.0. Net operating income is calculated by subtracting the total operating expenses from the gross rental income. Total debt service is the total of all debt-related expenses the property must pay. The DSCR ratio is what tells the borrower and lender how much income to debt the property is generating to cover (or not cover) its own expenses. DSCR > 1 means the property is generating enough income to cover its debt DSCR = 1 means the property is just breaking even with enough income to cover its debt DSCR < 1 means the property isn’t generating enough income to cover its debt, posing a greater risk for lenders. Let’s look at an example: What this means is this property is generating $150,000 in income with total expenses equalling $100,000. This results in a DSCR of 1.5, so the property yields 50% more income than what’s needed to cover its debt, making it a more acceptable threshold for a lender to consider financing. DSCR Loan Requirements The criteria for a DSCR loan are vastly different from that of a traditional mortgage. Whereas a bank will want proof of income, a W2, and tax returns and consider your personal credit, a DSCR loan is more concerned with the property’s earning potential. The buyer must provide the property’s current income and expense reports, a verifiable property appraisal, and a credit check. However, DSCR loans have a much less stringent benchmark for personal credit than would be the case with a conventional mortgage. Traditional lenders lean more on the buyer’s credit score and income than the property’s income. DSCR loans turn that equation upside down; though the buyer’s personal credit has some weight, it is a minor factor compared to the property’s earning potential. DSCR Loan Pros and Cons While DSCR loans are often easier and faster to obtain a mortgage from a bank, there are some caveats to consider. On the plus side, DSCR loans are an excellent option for investors who do not have a traditional source of income. Since they are strictly used for investment, they can help people quickly build a real estate portfolio without having to prove personal income. Many investors find DSCR loans helpful when working with other investors as they allow for a shared ownership, making it possible to borrow in partnership with others through an LLC. Depending on the buyer’s financial situation, there may be drawbacks to DSCR loans. For one, the required downpayment is often higher than would be the case for a traditional mortgage. Higher interest rates, closing costs, and additional fees should also be considered. DSCR loans are considered to be higher risk as they do not require personal income verification, hence, they often come with higher fees. In some cases, there may also be a prepayment penalty, meaning you’re locked into your payments for the loan term. Additionally, buyers may not have the same protection as a conventional mortgage because government agencies do not back DSCR loans. The above point underscores the importance of ensuring the property’s income potential holds up, as cash flow problems may lead to financial distress or foreclosure. DSCR loans are not recommended for properties lacking stable income or in areas with challenging or volatile real estate markets. Is a DSCR Loan Right for You? DSCR loans offer incredible flexibility and are fast becoming the preferred loan vehicle for residential real estate investors today. Working with a lender well-versed in DSRC financing will give you the expertise and options you need to achieve your investment goals. Ultimately, DSCR loans may be a better option for self-employed investors, investment partnerships, or in scenarios where the property’s income potential comfortably exceeds its expenses. However, a conventional mortgage may be a more suitable and affordable choice for first-time buyers or anyone who plans to live at the property. To learn more about the different types of loans available for your next real estate investment, we’re here to help. Contact LendingOne today.

Between 2005 and 2019, the share of single-family homes under construction built expressly for renting rose from 1.9% to 4.5% as the build-to-rent business model slowly gained momentum. Then came the easy-money era during the pandemic, with cash-flush institutional firms looking for ways to deploy capital. By 2023, build-to-rent made up 9.3% of single-family housing starts. While build-to-rent (BTR) single-family home development still represents a small share of all single-family homes being constructed, more BTR communities continue to pop up across the country. To find out which markets are at the front of the pack for single-family build-to-rent development, LendingOne analyzed the latest data.  Our key findings: Build-to-rent is still a growing asset class. Markets in the Sun Belt are driving the bulk of new development. Phoenix and Dallas are the epicenters of the build-to-rent boom.     Build-to-rent investors want to develop in markets where rental demand will remain strong in the long term, seeking high-growth markets with favorable demographics. Younger generations tend to be the primary demographic for single-family rentals, as many would like to live in a single-family home, but are currently priced out of the purchase market.  Some Midwestern markets like Columbus are starting to ramp up BTR development. That said, Sun Belt markets like Phoenix, Atlanta, Orlando, and Southwest Florida are still the big go-tos for BTR developers, due to robust single-family housing demand, sufficient land availability for community development, and their long-term rental outlooks.     While high interest rates have made investors weary over the past couple of years, there is still significant interest in the build-to-rent market.  Look no further than single-family landlord giant AMH (American Homes 4 Rent), which back in 2017 formed its own in-house homebuilder to focus on build-to-rent. Of AMH’s nearly 60,000 single-family rentals, 10,000 are build-to-rent units developed from scratch by its in-house homebuilding team. AMH is now the nation’s 39th largest builder and has another 10,000 units in its build-to-rent pipeline Big Picture: Investor interest in the build-to-rent space remains substantial despite higher interest rates. Build-to-rent single-family rentals continue to pop up across the nation—particularly in the Sun Belt, where the long-term outlook for single-family rentals is strong and there’s room for development.

The Housing Market is at an Inflection Point As we prepare to head into 2025, the U.S. housing market is at an inflection point. We’ve seen unprecedented low inventory levels over the past few years, and we still face a national market defined by limited supply. This inventory scarcity in many markets has kept home prices high, given investors few homes to consider, and made it challenging for single-family investors to find acceptable deals. The good news?  Now that the average 30-year fixed mortgage rate has dropped to 6.08% as of last week, and the Fed has shifted into rate-cutting mode, some homeowners—who might have wanted to sell their home and buy something else over the past two years but didn’t, unwilling to trade their 3% or 4% rate for a 7% or 8% rate—may now consider making the move if rates stay below 6.0%. For single-family investors and landlords, this could create opportunity.  While the market may not be delivering major price corrections, I expect that transaction volumes will increase as rates stabilize. This uptick will foster a sense of optimism in the market. A slight increase in turnover within the existing home market will create more opportunities for investors to find the right deals, even if we don’t experience significant price drops or the same level of rent appreciation we had over the prior years. Moving forward, maintaining realistic expectations regarding proforma rents and expenses will be key for investors as they evaluate the increased inventory to the market. Here are a few expanded thoughts.   Listing Recovery Will Take Time Now that mortgage rates have come off the highs, we should begin to see more new listings. However, it’ll take time/years to get the resale market fully back to pre-pandemic 2019 levels for new listings. Even with mortgage rates coming down slightly, we’re still in a situation where the majority of homeowners are sitting on sub-4.5% rates, and many are unwilling to sell their homes unless it’s necessary. Simply put, the lock-in effect will ease but not disappear in 2025. Total U.S. new listings for sale, by month There are Already More Deals in Regional Pockets Unlike new monthly listings, total active listings—everything for sale in a given month—are already beginning to increase/recover in some areas of the country. Affordability concerns, the end of the pandemic migration boom, and competition from builders using buydowns mean that existing homes are taking longer to sell in certain pockets of the country. For example, Days on Market are increasing in some areas. Much of the increase in active inventory has occurred in pockets of the Southwest and Southeast, which were extremely red-hot during the pandemic housing boom. Homebuyers have already gained more leverage in areas where active inventory is rising. Where active housing inventory for sale is above (purple) or still below (yellow) pre-pandemic levels The Biggest Mortgage Rate Dip is Here–But a Little More Could Come The biggest drop in mortgage rates, with the average 30-year fixed mortgage rate as tracked by Freddie Mac falling from 7.79% in October 2023 to 6.08% as of last week, might already be here. While most of the major research firms still expect some more declines for mortgage rates, they don’t foresee anything too dramatic coming over the next year.  Below is the forecast for the average 30-year fixed mortgage rate in Q4 2025:  Mortgage Bankers Association: 5.80% Fannie Mae: 5.70% Wells Fargo: 5.55% Where the average 30-Year Fixed mortgage rate is predicted to go through the end of 2025   Big Picture As mortgage rates decrease slightly and more inventory enters the market, transaction volume should increase, boosting confidence across the real estate sector, including among realtors, mortgage professionals, and investors. Though significant home price and rent changes are unlikely in 2025, the increase in confidence and transaction volumes should make everyone involved in the market happier in 2025.