2025 Real Estate Investing Trends: Fix-and-Flips, Rentals, and Ground-Up Builds—Where Are We Headed?

It’s 2025. If you survived the post-pandemic rollercoaster, the rate spikes, and at least one contractor ghosting you—congrats. You’re officially a real estate investor.

Whether you’re flipping distressed bungalows, buying up single-family rentals, or laying fresh foundations for the next infill quadplex, the landscape has shifted. 2024 was a recalibration year. 2025? It’s shaping up to be a proving ground. Investors who’ve survived the froth and frosty spells of the past two years are now adapting to a real estate market that demands skill, agility, and a dose of realism. The name of the game is execution—finding value, moving quickly, and adding real, tangible equity.

In this deep-dive, we’ll break down the latest data, compare trends to 2024, and help you navigate the complexities of investing in today’s fix and flip, rental, and new construction markets. Whether you’re a seasoned pro or just starting to scale your first portfolio, here’s what you need to know about where the smart money is heading.

The Fix and Flip Market: Leaner, Smarter, and Holding Tight

Flipping in 2025 isn’t for the faint of heart. Gone are the days of big margins on mediocre makeovers. Today, it’s all about precision, timing, and squeezing every bit of juice from each lemon of a listing. Inventory is scarce, competition is high, and profit margins are under constant pressure from high interest rates, increased labor costs, and inflationary supply issues.

Quick Stats:

• 297,885 homes flipped in 2024, a 7.7% drop from 2023

• Flips now make up about 7.6% of all U.S. home sales (down from 8.1%)

• Median gross profit: $72,000 per flip (up from $67,846 in 2023)

• Average ROI: 29.6% (still well below the 2016 peak of 54%)

While profits edged up slightly, that ROI number is deceiving. After accounting for rising holding costs, double-digit financing rates, and renovation expenses that feel like they’ve been sprinkled with inflation dust, actual take-home margins are leaner than they look. It’s a game for savvy operators now. The flippers who are thriving are those who manage their scopes ruthlessly, value engineer their finishes, and keep timelines tight. Days on market matter more than ever.

Cash is king in 2025—over 63% of flips were bought without financing. Not because investors have suddenly found money trees, but because hard money loans come with hard-to-swallow rates. That said, professional investors continue to leverage capital from private money and institutional lenders. Why? Because fast closings and flexible underwriting still mean deals can get done competitively. Many are using short-term capital to acquire and rehab, then transitioning into longer-term DSCR loans for cash-out refinances after seasoning.

What’s more, many flippers are hedging their bets by turning flips into rentals when resale margins are thin. The “fix-to-rent” model is increasingly common, particularly in submarkets where rents are strong but comps are soft. Some investors are even shifting toward minor cosmetic rehabs over full gut jobs to reduce cost and speed up the timeline. If you’re looking to win in this market, speed, efficiency, and a strong contractor network are your competitive edge.

Another trend? Group flips. Small investor collectives are pooling capital and operational expertise to spread risk. These micro-joint ventures allow investors to enter competitive markets, share the burden of labor costs, and even vertically integrate rehab services to control costs. In a world where $10,000 over budget can tank a deal, predictability is the new profit booster.

Rentals: The Slow, Steady, Cash-Flowing Tortoise

Compared to flipping, the rental market in 2025 is the low-drama sibling: steady, dependable, and mostly immune to the weekly economic headlines. But make no mistake—landlords are feeling the squeeze, too. Cash flow is harder to generate than it was during the low-interest era, and the days of easy arbitrage between rent and mortgage payments are behind us. That said, the fundamentals of the rental business remain sound: limited housing supply, rising population, and a large cohort of would-be homeowners priced out of the buying market.

Quick Stats:

• Single-family rent growth: ~1.5% YOY in Q4 2024 (the lowest in 14 years)

• Gross rental yield: Down slightly to 7.45% (from 7.52% in 2024)

• Investor purchases: Down 11% YOY from 2023

• All-cash investor purchases: Down to 32.6% from 35.1% in 2023

What’s changed in 2025 is investor mindset. The rental space has become more of a fundamentals play than a momentum one. Investors are buying with the expectation of slower rent growth, increased tenant incentives, and the need to underwrite deals with conservative assumptions. In hot rent-growth markets of years past, appreciation masked operational inefficiencies. Now, those inefficiencies can sink a deal.

So how are landlords responding?

• Chasing Yield in the Heartland: The search for cash flow is pushing more investors into secondary and tertiary markets. Cleveland, Kansas City, Louisville, and Huntsville are topping investor watchlists due to favorable price-to-rent ratios and improving local economies. In these markets, it’s still possible to achieve 8–10% cap rates, especially on small multifamily assets.
• Fix-to-Rent Is Booming: This strategy has emerged as the middle ground between flipping and buy-and-hold. Investors are acquiring distressed or dated properties, making strategic improvements, and placing them into rental portfolios with long-term debt. It’s an equity-building model that pairs nicely with DSCR financing—and it helps investors ride out slower appreciation cycles.
• Longer Holding Periods, Lower Turnover: More landlords are emphasizing tenant retention over aggressive rent hikes. Renewals, rather than turnovers, are the profit drivers. Some are even investing in tenant amenities (like in-unit laundry or smart thermostats) to improve satisfaction and lengthen tenancy.
• Institutional Influence, Local Execution: The BTR trend continues, but smaller investors are taking cues from institutions. That includes improving unit design for long-term durability, adding community features (shared yards, pet areas), and even clustering rentals in walkable corridors to build scale.
• Creative Financing and Structure: With DSCR loan rates in the high 6% to 9% range, many landlords are blending financing solutions. That includes layering in seller financing, using delayed financing strategies post-cash purchase, or structuring portfolio-level loans for better pricing.

What’s most impressive? The resilience of mom-and-pop investors. Despite headlines about institutional players dominating the market, the vast majority of SFRs are still owned by individuals or small partnerships. These landlords are evolving, digitizing operations, and adopting better property management practices than ever before.

Looking for flexible financing on your next rental? Check out our DSCR rental loans designed for investors focused on long-term cash flow, with options for various rental types, seasoning strategies, and more.

Ground-Up Construction: Small Builders, Big Momentum

In a market starving for inventory, new construction is stepping in to fill the void—especially when it comes to 1–4 unit residential properties. Unlike the boom-and-bust multifamily development cycles in major metros, the small-scale, ground-up residential space has seen steady growth and renewed interest from experienced builders and investor-builders alike.

Quick Stats:

• Single-family housing starts in 2024: 1.01 million units (up 6.5% from 2023)

• Multifamily starts: Down ~25% year-over-year

• Median new home sales price: ~$415,000 in early 2025 (down slightly from 2023)

• Builder confidence index (NAHB): 39 in March 2025, down from the 50s mid-2024

The resurgence in small-scale development is driven by necessity. With existing home inventory still at record lows—and baby boomers aging in place instead of downsizing—buyers are looking to new homes for move-in ready options. That demand has encouraged small builders, GC-backed investors, and private capital to take on more infill projects, especially in areas with ADU allowances and relaxed zoning regulations.

But let’s be clear: building isn’t cheap. Construction costs are still elevated, even if no longer rising at 2022’s breakneck pace. Materials have stabilized (thank you, lumber gods), but labor remains tight, and permitting delays are real in many municipalities. Still, professional investors and builders are finding ways to make ground-up construction pencil, often by:

• Using land already in the portfolio or acquired below market

• Modular and prefab construction for timeline control

• Targeting build-to-rent models to ensure immediate cash flow upon completion

• Teaming up with capital partners to scale 2–4 unit construction in suburban markets

What’s changed in 2025 is a focus on build efficiency over sheer volume. Smaller builders are turning to lean construction management practices—tracking labor inputs like they’re running a factory—and automating supplier orders. They’re also embracing modern design efficiencies: same-floor plumbing stacks, standard-sized window packages, and minimalist finishes that attract buyers without bloating the budget.

Builders are also being selective about where they build. While California and the Pacific Northwest still present permitting and cost challenges, places like Texas, Tennessee, and the Carolinas continue to be magnets for small-scale developers. In particular, markets like Austin suburbs, Knoxville, and Greenville have seen a rise in 2–4 unit infill builds, thanks to zoning shifts and affordable land.

Need financing for your next build? AHL offers ground-up construction loans tailored to 1–4 unit projects, including spec builds and build-to-rent strategies.

Financing in 2025: Not Cheap, But Still Working

Let’s talk about the elephant in the spreadsheet: financing. It’s more expensive, yes. But is it a deal killer? Not for professionals. Investors who understand leverage, carry-costs, and exit strategies are still tapping into capital, and lenders—including private money and institutional hard money firms—are eager to fund smart deals.

Here’s what the financing landscape looks like right now:

• Hard money loan rates: 9–12% interest on average, often interest-only, 6–12 month terms

• DSCR loans: 6.5%–9% depending on LTV, credit, and property income

• Construction loans: High 9%–11% range, often with interest reserves and project draw schedules

• Conventional investment loans: ~7%–8%, limited to conforming loan sizes

These rates aren’t for the faint of heart—but they’re not deal-breakers either. Institutional capital has not dried up. In fact, many lenders are refining their programs to better fit today’s realities, including longer seasoning windows for DSCR refis, higher max loan amounts, and more aggressive ARV assumptions in appreciating markets.

Here’s how seasoned investors are adapting:

• Better underwriting: Deals now need tighter numbers. Lenders are scrutinizing budgets and resale comps, but investors are meeting the challenge with detailed scopes, upfront contractor bids, and solid exit strategies.

• Value-add optimization: Investors are reducing scope bloat. Instead of a full luxury gut, many flippers are going mid-grade finishes with high-impact curb appeal—saving tens of thousands without sacrificing resale velocity.

• Combo loans: Many investors are combining fix-and-flip financing with takeout DSCR loans, allowing them to flip-to-rent with fewer friction points.

• Rate buydowns and incentives: It’s not just for homeowners. Investors are negotiating rate buydowns with lenders, especially on larger loan amounts or repeat business.

The key takeaway? Financing hasn’t dried up—it’s evolved. You need to know your numbers, pick the right partners, and stay agile. But capital is available and flowing into deals with clear upside.

At AHL, we’re still closing deals weekly with fix and flippers, builders, and long-term investors alike. Our loan programs are designed for active professionals who understand the power of leverage.

Regional Highlights: Where’s the Juice?

While national averages provide a helpful snapshot, real estate is fundamentally hyperlocal. In 2025, the performance of different metro areas varies widely depending on local supply, demand, migration patterns, job markets, and policy environments. Here’s a closer look at what’s happening across regions and why some markets are attracting investor capital while others are seeing a cooldown.

Hot Markets for Flipping & Rental Yield:

• Midwest (Cleveland, Indianapolis, Detroit): The Midwest continues to offer some of the most attractive cap rates in the country, with gross rental yields commonly exceeding 10%. Cleveland, for example, offers single-family homes at entry prices under $150K with monthly rents that can top $1,300. Investors are drawn to the region’s affordability, steady rental demand, and lower exposure to economic volatility. Indianapolis is seeing growth in logistics and manufacturing employment, supporting demand for both rentals and workforce housing.
• Southeast (Birmingham, Mobile, Tampa): Birmingham and Mobile continue to shine in 2025 thanks to low acquisition costs and strong rent-to-price ratios. With population growth continuing across Alabama and Florida, investors are finding value in secondary and tertiary markets. Tampa, while more competitive, remains a favorite due to strong in-migration and relatively low inventory levels. SFR portfolios in the Southeast are seeing 7–10% returns in B-class neighborhoods.
• Upstate NY (Buffalo, Rochester): Upstate New York has quietly become a hub for cash-flow-focused investors. Buffalo’s median home price remains under $200K while average rents are steadily climbing. In Rochester, strong healthcare and university sectors provide economic stability, and local policies have been relatively friendly to landlords compared to NYC. Investors here often use value-add strategies to increase returns through light rehab or small multifamily conversions.
• Texas (San Antonio, Fort Worth, Corpus Christi): While Austin has cooled, other Texas markets are heating up. San Antonio and Fort Worth provide a balance of population growth, job creation, and housing affordability. Corpus Christi has emerged as a port city with rising industrial development, bringing new workers and rental demand. With no state income tax and landlord-friendly laws, Texas remains high on investors’ radar.

Cooling or Cautious Markets:

• West Coast (San Francisco, Los Angeles, Seattle): High home prices, restrictive zoning, and aggressive rent control laws continue to push investors out of traditional West Coast metros. In San Francisco, for example, the median home price remains well over $1M, while rent growth has flattened. In Seattle, an oversupply of multifamily units has suppressed rents and pressured cap rates. Investors in these areas are either sitting on long-held properties or cashing out.
• Overbuilt Sun Belt Metros (Phoenix, Austin, Las Vegas): After surging during the pandemic, these cities are now seeing a rebalancing. Phoenix and Austin, in particular, were investor favorites in 2021–22, but with thousands of new units hitting the market, rent growth has decelerated sharply. Vacancy rates have ticked up, putting pressure on landlords who bought at peak prices. Las Vegas remains volatile due to its tourism-based economy.
• Northeast Urban Cores (New York City, Boston): Investor appetite has cooled in dense urban cores with high acquisition costs and tight regulations. While demand is rebounding post-COVID, ROI remains thin unless investors can execute complex value-add strategies or convert underutilized commercial space into residential. Suburban and exurban areas in the Northeast are more promising, especially in counties adjacent to major metros with strong commuter infrastructure.

Emerging Opportunity Zones:

• College Towns with Tech Growth (e.g., Knoxville, TN; Madison, WI): These cities offer a mix of academic stability and growing tech employment, creating strong tenant demand. Investors are targeting student housing and workforce housing alike.
• Exurban Corridors (e.g., northern Georgia, central Florida, Inland Empire CA): Improved infrastructure, remote work trends, and affordability are fueling growth in exurban regions. These markets often have more favorable zoning for ADUs and small multifamily, offering creative investment plays.
• Affordable Urban Revival Markets (e.g., St. Louis, Milwaukee, Kansas City): Long overlooked, these cities are drawing investor attention due to improving local economies, arts and culture scenes, and revitalization efforts. Property values are still relatively low, creating room for appreciation.

The key takeaway: in 2025, savvy investors are moving beyond the top-10 metros and focusing on yield-driven, under-the-radar markets that combine strong fundamentals with room to grow. As inventory remains tight nationwide, local nuances will continue to drive where—and how—capital is deployed.

Conclusion: 2025 Belongs to the Professionals

If 2021 was the gold rush and 2022–2023 were the hangover, then 2025 is the year of the resilient operator. No one’s coasting on appreciation anymore. Investors need to be sharp, strategic, and committed to execution.

But here’s the good news: the market is clearing out the tourists. Fewer bidders, smarter capital, and better deals are emerging. Whether you’re flipping homes, renting out duplexes, or breaking ground on your next 4-pack, there’s opportunity out there. Just bring your spreadsheet, your network, and a willingness to roll up your sleeves.

Looking for leverage that works in today’s market? Connect with the AHL team—we’re here to help you move fast, fund with confidence, and scale your portfolio like a pro.