The landscape of real estate investing has shifted dramatically since the pandemic era. What once felt like a can’t-miss opportunity now requires careful strategy, deeper market knowledge, and a fundamental shift in how we evaluate potential deals. But don’t let that discourage you. While the easy money may be gone, opportunities still exist for investors who know where to look and how to structure their investments for success.
The New Reality: Why Yesterday’s Playbook No Longer Works
Remember 2020 and 2021? Those were heady days for real estate investors. Record-low mortgage rates, sometimes dipping below 3%, combined with rapid property appreciation created what can only be described as a forgiving market environment. Even marginal properties performed well, and leverage was remarkably cheap.
“During the pandemic, record-low interest rates and rapid capital appreciation created a highly forgiving environment for investors,” explains Duncan Kreeger, a real estate investor and finance executive. “Leverage was cheap, price growth was consistent, and even marginal assets performed well.”
Fast forward to today, and the picture looks dramatically different. Mortgage rates have been hovering stubbornly above 6%, renovation costs have surged due to material and labor shortages, and rent growth has cooled considerably in many markets. The deals that used to pencil out easily now require significantly more due diligence and creative structuring.
“The fundamentals have changed,” Kreeger emphasizes. “Investors can no longer rely on rising asset values alone. Cash flow, net operating income, and the ability to manage costs now sit at the center of every sound investment decision.”
This doesn’t mean real estate investing is dead. Far from it. But it does mean that the casual investor who could succeed through market momentum alone will struggle in today’s environment. Success now belongs to those who approach real estate as a professional, active investment strategy rather than a passive wealth-building tool.
Where the Opportunities Are: Following the Money to Emerging Markets
Despite the challenging conditions, savvy investors are still generating solid returns. The key is knowing where to look and what to look for.
According to recent data from Realtor.com, investor activity remains robust in specific regions. Missouri led the nation in investor buyer share in 2024 at 21.2%, followed by Oklahoma at 18.7%, Kansas at 18.4%, Utah at 18%, and Georgia at 17.3%. These aren’t just random markets where investors happen to be active. They share several critical characteristics that make them attractive in the current environment.
The Midwest and South Advantage
What makes these markets particularly appealing right now? Several factors converge to create favorable conditions:
Affordability Meets Demand: Entry prices in these markets remain accessible compared to coastal cities, allowing investors to achieve better cash-on-cash returns from day one. You’re not fighting for scraps in an overheated market where every property has twenty competing offers.
Population Inflows: These regions are experiencing steady population growth as workers and families relocate from higher-cost areas. This demographic shift creates sustained rental demand and supports long-term property values.
Job Market Expansion: Local economies in these areas are diversifying and growing. New employers moving to the region create employment stability, which translates to reliable tenant bases and lower vacancy rates.
Construction Activity: Many of these markets are proactively addressing housing supply through new construction, which helps prevent the kind of bubble conditions that can lead to crashes.
The Smart Play: Single-Family Rentals and Small Multifamily
Kreeger points to single-family rentals in supply-constrained areas and smaller multifamily units as particularly attractive opportunities in today’s market. These asset types offer several advantages:
Single-family rentals provide diversification potential through multiple properties while keeping management relatively straightforward. They also appeal to a broad tenant base, including families looking for yard space and pet-friendly options who might struggle to find suitable apartments.
Small multifamily properties (2-4 units) offer income diversification within a single asset. If one unit experiences turnover, you still have rental income from the others. They’re also generally easier to finance than larger commercial properties and can often be purchased with residential financing.
However, Kreeger urges caution with short-term rentals. “Returns can evaporate as demand or regulations shift,” he warns. The focus should be on control and stability rather than chasing the highest possible yields from vacation rentals that may face regulatory crackdowns or market saturation.
Beyond Geography: Identifying Growth Markets That Will Sustain Returns
While regional trends provide a useful starting point, truly sophisticated investors dig deeper to identify markets positioned for long-term success.
“Across the country, every state is trying to attract capital, talent, and innovation to fuel sustainable economic growth,” says Jeff Herman, an investment adviser who works with residential and commercial buyers. “But the truth is, it’s hard to do. I’d recommend identifying your target markets by researching those states that are successfully investing in infrastructure, education, and business climate to create the kind of ecosystem where entrepreneurs want to build.”
The South Carolina Success Story
Herman highlights South Carolina as an example of a state that’s getting it right. According to a recent International Monetary Fund report, the state has experienced a boom in startup activity since 2010. This isn’t just about one or two large companies relocating. It’s a fundamental shift in the state’s economic trajectory.
“That data confirms what many investors and business owners in the state already sense: This is a state on the rise,” Herman notes.
The state has also earned top marks in Realtor.com’s State-by-State Report Cards for affordability and its large share of new construction permits. This combination is crucial. The state is attracting businesses and talent while simultaneously building the housing infrastructure to accommodate growth. It’s a virtuous cycle that creates opportunities for investors who get in early.
The Pre-Sale Advantage: Getting Ahead of the Market
For investors willing to take a longer-term approach, new construction pre-sales represent an often-overlooked opportunity.
“Be first in line for presales,” Herman advises. “Developers often need early buyers for new projects. Look for news articles about new developments, do your research, and follow the companies that will bring them to life.”
The advantages of this strategy are significant:
Lower Entry Prices: Developers typically offer better pricing to early buyers who help them secure construction financing or demonstrate market demand.
Negotiable Upgrades: Early buyers often have leverage to negotiate upgrades that boost the property’s value without additional out-of-pocket costs.
Built-In Appreciation: If you secure a property at pre-construction pricing in a rising market, you may have immediate equity once the project completes.
Exit Flexibility: “Once the project is completed, if you want to, you can sell for a profit before you ever set foot on the property,” Herman points out.
This strategy does require patience and careful vetting of the developer’s track record, but for investors with time horizons of 18-36 months, it can provide returns that are difficult to achieve through traditional property purchases.
The New Math: Critical Costs Every Investor Must Account For
The formulas that powered pandemic-era profits will solve for losses in today’s market. Investors need to fundamentally rethink how they evaluate potential deals, shifting focus from appreciation potential to operational fundamentals.
Common Pitfalls That Sink Deals
“First-time investors frequently underestimate operational and regulatory costs,” Kreeger explains. “Many rely on outdated assumptions about rent growth or market appreciation. Others overextend themselves with leverage or overlook important local legislation that affects tenant rights, licensing, or occupancy rules.”
These oversights aren’t minor inconveniences. They can quickly erode margins and turn what looked like a profitable investment into a cash drain.
The Regulatory Risk: Lessons from New York
New York provides a cautionary tale about how regulatory changes can impact returns. Over the past decade, the city’s Rent Guidelines Board has allowed rent in rent-stabilized apartments to grow by only 17%, falling well below cumulative inflation during that period. Meanwhile, the city has implemented numerous new regulations, including green mandates that require costly upgrades to buildings and apartments.
These headwinds have significantly impacted returns, though interestingly, landlords of rent-stabilized apartments still saw a 12.1% increase in net operating income from 2022 to 2023 according to a recent study. The situation illustrates an important point: even in challenging regulatory environments, prepared investors can succeed, but you must model these costs into your projections.
The Hidden Killers: Vacancy and Maintenance
“One of the most significant errors is failing to plan for void periods or maintenance events, which can materially impact cash flow,” Kreeger warns.
Too many investors run their numbers assuming 100% occupancy with minimal maintenance expenses. The reality is that even well-managed properties experience tenant turnover, and every property requires ongoing maintenance and occasional major repairs.
Budget for at least 5-10% vacancy rates, even in strong markets. Set aside 1-2% of the property value annually for maintenance, and build a reserve for major capital expenditures like roof replacement, HVAC systems, or foundation repairs. These aren’t pessimistic assumptions. They’re realistic planning that separates successful long-term investors from those who struggle through the first major unexpected expense.
The Insurance Crisis: A Recent Game-Changer
Insurance premiums have emerged as one of the most significant deal-breakers over the past two years. Costs have surged across much of the country, with some markets seeing increases of 30-50% or more. Florida and California have been particularly hard hit, with some investors finding properties simply uninsurable at any price.
Get actual insurance quotes before you close on a property. Don’t rely on estimates or assumptions based on previous properties. The insurance landscape is changing rapidly, and what was affordable six months ago may not be today.
Property Tax Considerations
Property taxes deserve special attention in your analysis. Research your local legislature thoroughly: What property tax caps do they have in place? Are there proposals to change them? Will the municipality need to raise mill rates in coming years to cover budget deficits?
Some seemingly affordable markets become less attractive when you factor in high or rapidly rising property taxes. Conversely, states with strong property tax caps (like California’s Proposition 13 or similar measures) provide more predictability in your long-term cost projections.
The Timing Question: Should You Wait for Rate Cuts?
The Federal Reserve’s monetary policy has become a constant topic of speculation. Should investors wait for rate cuts before buying? The answer is more nuanced than a simple yes or no.
Market timing is inherently risky, especially in uncertain environments. When rates fall, several things typically happen simultaneously:
Competition Surges: More buyers enter the market as financing becomes more attractive, driving up prices.
Prices Adjust Upward: Sellers anticipate increased demand and adjust their asking prices accordingly.
Financing Advantage Erodes: The lower interest rate gets partially offset by higher purchase prices.
“Trying to time interest rate movements is speculative and, in most cases, unproductive,” Kreeger explains. “If a deal makes sense today based on conservative assumptions, it is often better to act than to wait.”
This doesn’t mean you should ignore interest rate trends entirely. But it does mean you shouldn’t let rate speculation prevent you from acting on a fundamentally sound deal. Moreover, remember that you can always refinance if rates drop significantly. You can’t go back in time to capture a great property you passed on.
The next opportunity is less likely to come from perfectly timing the rate cycle and more likely from buying intelligently with enough margin to weather various market conditions.
Evaluating Deals: The Framework for Success in Today’s Market
So how do you know if a specific investment property is worth buying right now? Here’s a comprehensive framework for evaluation:
Start with Entry Price
A deal that begins below comparable sales or involves a motivated seller provides immediate equity and healthier margins. This cushion becomes crucial when facing unexpected costs or market downturns.
Look for properties that have been on the market for extended periods, estate sales, properties in need of cosmetic updates that scare away less experienced investors, or sellers relocating for work who need to close quickly.
Run Stress Tests on Your Numbers
Every potential investment should be modeled to understand how it performs under various scenarios. What happens if interest rates rise further? What if expenses increase by 20%? What if you experience 15% vacancy instead of the 5% you projected?
If the deal only works under perfect conditions, it’s not a deal. You need margin for error.
Master These Critical Metrics
Two key metrics help investors measure whether a property’s income truly supports its debt and cash flow:
Debt Service Coverage Ratio (DSCR): This compares a property’s net operating income to its annual debt payments. The formula is:
DSCR = Net Operating Income / Annual Debt Service
A DSCR of 1.0 means the property earns just enough to cover the mortgage. A DSCR of 1.25 or higher is typically considered healthy, signaling the property generates 25% more income than needed to pay its debt. Many lenders require a minimum DSCR of 1.20-1.25 for investment property loans.
Cash-on-Cash Return (CoC): This measures how much cash flow you earn relative to the cash you’ve invested. The formula is:
CoC Return = Annual Pre-Tax Cash Flow / Total Cash Invested
For example, if you invest $100,000 in down payment and closing costs and the property generates $10,000 in annual cash flow after all expenses and debt service, your CoC return is 10%. This metric is especially important when borrowing costs are high because it shows your actual return on the capital you have at risk, independent of appreciation potential.
Target CoC returns should typically be in the 7-12% range for most markets, though this varies based on property type and location. Higher CoC returns often indicate higher risk, so understand why a property offers above-market returns.
Understand Your Complete Overhead
Beyond the obvious costs of mortgage, taxes, and insurance, make sure you’re accounting for:
Get actual quotes for insurance before closing. This is critical. Insurance costs have been one of the biggest deal-breakers of the past two years, with premiums rising dramatically across the country.
Map Your Exit Strategies
Every investment should have clear exit strategies defined before you buy, not after. Consider:
Refinancing: If you improve operations or the market strengthens, you might refinance to lower your rate or pull out equity for the next investment.
Sale into Stronger Market: If appreciation materializes, you could sell and take your profits.
1031 Exchange: This allows you to defer capital gains taxes by rolling proceeds into a new investment property, enabling portfolio growth without tax friction.
Long-Term Hold: Perhaps the property generates such strong cash flow that holding long-term for income makes the most sense.
Set timelines and assumptions for each strategy before you purchase. This planning discipline prevents you from being forced into suboptimal decisions later.
The Control-Focused Investment Thesis
Throughout our conversation with investors and advisers, one theme emerged consistently: the shift from speculation to control.
“Across all categories, investors are prioritizing control over speculation,” Kreeger observes. “Assets where operational improvements can be made or income can be increased are receiving the most attention.”
This represents a fundamental shift in investment philosophy. Rather than betting on market-wide appreciation, successful investors are looking for properties where they can create value through:
Operational Improvements: Better property management, improved tenant screening, more efficient maintenance practices.
Physical Improvements: Strategic renovations that justify higher rents or reduce operating costs.
Income Optimization: Adding amenities, implementing rent management strategies, or converting underutilized space to productive use.
Expense Reduction: Negotiating better vendor contracts, improving energy efficiency, or reducing turnover costs through better tenant relations.
This approach insulates you somewhat from market volatility. Even if appreciation stalls, you’re building value through active management rather than hoping for market momentum to bail you out.
Property Management Frequently Asked Questions (FAQ)
The Bottom Line: Is It Worth It?
So, returning to our original question: Is buying an investment property worth it right now?
The answer is yes, but with critical caveats. This is not a market for casual investors or those looking to get rich quickly with minimal effort. Success requires:
“Successful investment today requires a disciplined, informed approach,” Kreeger emphasizes. “Real estate can still offer strong long-term returns, but only when treated as a professional and active investment strategy.”
For investors willing to do the work, opportunities absolutely exist. The Midwest and South continue to offer accessible entry points with steady demand. Growth markets like South Carolina present compelling long-term value. Pre-construction opportunities can provide advantages for patient investors. And throughout the country, properties exist where operational improvements can generate returns that transcend market conditions.
But make no mistake: in today’s market, a deal is worth it only when it performs under stress. Run your numbers conservatively, build in margin for error, and focus on fundamentals. The investors who succeed in this environment won’t be the ones who take the biggest risks. They’ll be the ones who do the best analysis, find the best deals, and manage their properties most effectively.
The era of easy money may be over, but the era of smart money has just begun.
To read more, visit Is Buying an Investment Property Still Worth It in 2025?.
