Institutional Investors Are Not Competing With Homebuyers

Institutional investors are not the enemy of traditional homebuyers. They do not compete for inventory; traditional homebuyers cannot buy what real estate investors buy. 89.6% of single-family rentals are held by “mom-and-pop” landlords who own between 1 and 5 rental properties. The media continues to do an outstanding job of misrepresenting what a “real estate investor” is, conflating “institutional investors” with the “mom and pop” investor. It makes for fantastic click bait given the public’s 10 second attention span. The MSM should examine the “rules” traditional homebuyers are subject to as well as what those in the lower price tier are up against. It will then be obvious; there is no competition. In fact, institutional investors were net SELLERS over 2025 and that trend is likely to continue through 2026.

Mortgage Underwriting Challenges

Home buyers that take mortgages are subject to several hurdles. Qualifying is the first and most obvious; they are evaluated in several areas and expected to meet minimum standards. The next is underwriting the specific home. It must meet minimum lending standards. Homes that fail must be brought to standard, and who is doing that with homes like this?

Appraisal Challenges

Most of the “investor” type homes are in the lower price tier and in need of work. In many cases, significant work. If. Any contract with a mortgage will require an appraisal, the appraiser will take numerous photos and document conditions. Depending on the loan type, there will be underwriting flags for work needed, unsafe conditions, failed systems and the like. These reports come back with appraised values “subject to” repairs being made. Who is doing the repairs?

The “90 Day Rule”

Many of these buyers will use FHA financing, and the “90 day flip” rule is an idiotic block for them. If a property is being resold 90 days or fewer after the seller acquired it, it’s not eligible for an FHA-insured mortgage (with some exemptions). Many “mom and pop” investors buy homes (like those above), complete repairs and rehabs, then list them for sale. Those homes are ineligible for FHA financing within the 90 day period. Adding insult to injury, if the before/after price has very large spread, FHA will order two appraisals, adding additional expense for the buyer. This is an unnecessary burden unique to FHA loans.

Home ownership is not a right; it is a privilege. The last crash was fueled by reckless lending, handouts, fraud, and the idea that a home was an ATM. Not everyone can or wants to own a home, Qualifying does not mean that a buyer can afford a home. Insurance, taxes, maintenance and the cost of living are never going down, owners not prepared will struggle. Ownership has moved down the priority list for many; replaced by renting for easier lifestyle, experiences, or other priorities. The bottom line is that there are many reasons potential buyers fail to gain ownership – but institutional investors competing for inventory isn’t even on the list.

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• market conditions (35)
• home buyers (22)
• investment homes (3)