Editor's Note: This story originally appeared on Stessa.
In the heated residential real estate market of the last two years, real estate investors have faced fierce competition and rising prices. While many prospective homebuyers were drawn into the market with historically low interest rates and investment returns, they have frequently found themselves outbid.
Investors purchased a record 18.4% of all U.S. homes sold in the last quarter of 2021, up from 12.6% in the last quarter of 2020. While real estate investment has reached new heights over the last year, the number of homes purchased by investors has grown steadily since the collapse of the housing bubble and the Great Recession in the mid-2000s.
Between appreciation in home values and steady income from rents, residential real estate has proven to be an attractive asset class for investors.
These attributes continue to make real estate a desirable investment. But for investors who require a mortgage loan to buy a rental property, financing can be more difficult to come by.
For investors who rely on financing to purchase property, most of the top locations for investment properties are found in the South. These states have some of the lowest costs to purchase real estate in the country, which makes them more easily attainable for prospective real estate investors.
The data used in this analysis is from the Federal Financial Institutions Examination Council (FFIEC) and is based on Home Mortgage Disclosure Act filings.
Here are the large U.S. metros (population 1 million or more) where people are mortgaging investment properties…
15. San Antonio-New Braunfels, TX
- Investment property loans as a percentage of all purchase loans: 8.7%
- Total investment property loans: 1,987
- Median property value for investment properties: $205,000
- Median down payment for investment properties: $50,000
- Median interest rate for investment properties: 3.9%
14. Las Vegas-Henderson-Paradise, NV
- Investment property loans as a percentage of all purchase loans: 8.8%
- Total investment property loans: 2,361
- Median property value for investment properties: $285,000
- Median down payment for investment properties: $80,000
- Median interest rate for investment properties: 4.0%
13. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD
- Investment property loans as a percentage of all purchase loans: 8.9%
- Total investment property loans: 5,214
- Median property value for investment properties: $225,000
- Median down payment for investment properties: $60,000
- Median interest rate for investment properties: 4.2%
12. San Diego-Chula Vista-Carlsbad, CA
- Investment property loans as a percentage of all purchase loans: 9.0%
- Total investment property loans: 2,493
- Median property value for investment properties: $635,000
- Median down payment for investment properties: $200,000
- Median interest rate for investment properties: 3.6%
11. Nashville-Davidson–Murfreesboro–Franklin, TN
- Investment property loans as a percentage of all purchase loans: 9.0%
- Total investment property loans: 2,932
- Median property value for investment properties: $265,000
- Median down payment for investment properties: $70,000
- Median interest rate for investment properties: 4.0%
10. Birmingham-Hoover, AL
- Investment property loans as a percentage of all purchase loans: 9.4%
- Total investment property loans: 1,274
- Median property value for investment properties: $125,000
- Median down payment for investment properties: $30,000
- Median interest rate for investment properties: 4.1%
9. Virginia Beach-Norfolk-Newport News, VA-NC
- Investment property loans as a percentage of all purchase loans: 10.2%
- Total investment property loans: 1,704
- Median property value for investment properties: $195,000
- Median down payment for investment properties: $50,000
- Median interest rate for investment properties: 4.3%
8. Kansas City, MO-KS
- Investment property loans as a percentage of all purchase loans: 10.6%
- Total investment property loans: 3,205
- Median property value for investment properties: $155,000
- Median down payment for investment properties: $40,000
- Median interest rate for investment properties: 4.1%
7. Austin-Round Rock-Georgetown, TX
- Investment property loans as a percentage of all purchase loans:10.9%
- Total investment property loans: 4,435
- Median property value for investment properties: $285,000
- Median down payment for investment properties: $70,000
- Median interest rate for investment properties: 3.5%
6. Los Angeles-Long Beach-Anaheim, CA
- Investment property loans as a percentage of all purchase loans: 10.9%
- Total investment property loans: 8,806
- Median property value for investment properties: $875,000
- Median down payment for investment properties: $310,000
- Median interest rate for investment properties: 3.7%
5. St. Louis, MO-IL
- Investment property loans as a percentage of all purchase loans: 11.8%
- Total investment property loans: 4,152
- Median property value for investment properties: $145,000
- Median down payment for investment properties: $40,000
- Median interest rate for investment properties:4.1%
4. New Orleans-Metairie, LA
- Investment property loans as a percentage of all purchase loans: 12.4%
- Total investment property loans: 1,308
- Median property value for investment properties:$240,000
- Median down payment for investment properties: $60,000
- Median interest rate for investment properties: 4.5%
3. Tulsa, OK
- Investment property loans as a percentage of all purchase loans: 13.2%
- Total investment property loans: 1,390
- Median property value for investment properties: $145,000
- Median down payment for investment properties: $30,000
- Median interest rate for investment properties: 4.4%
2. Memphis, TN-MS-AR
- Investment property loans as a percentage of all purchase loans: 20.6%
- Total investment property loans: 2,560
- Median property value for investment properties: $115,000
- Median down payment for investment properties: $30,000
- Median interest rate for investment properties: 4.1%
1. Oklahoma City, OK
- Investment property loans as a percentage of all purchase loans: 20.9%
- Total investment property loans: 3,549
- Median property value for investment properties: $155,000
- Median down payment for investment properties: $40,000
- Median interest rate for investment properties: 4.3%
Methodology
The data used in this analysis is from the Federal Financial Institutions Examination Council (FFIEC) and is based on Home Mortgage Disclosure Act filings. Only conventional home purchase loans approved in 2020 were considered.
To determine the locations where people are buying investment properties, researchers calculated investment property loans as a percentage of all purchase loans. In the event of a tie, the location with the greater total investment property loans was ranked higher. To improve relevance, only metropolitan areas with at least 100,000 residents were included. Additionally, metros were grouped into cohorts based on population size: small (100,000 to 349,999), midsize (350,000 to 999,999), and large (1,000,000 or more).
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