The Best Markets for Real Estate Investors

According to Realtor.com, investors purchased approximately 224,000 homes during the first half of 2026. That’s a 7% decline from the same period last year and the lowest first-half total since 2020. Despite the decline, investors still accounted for 10.7% of all home purchases, roughly the same percentage as a year earlier.

What I find particularly interesting isn’t how many properties investors are buying. It’s how much less they’re paying compared to traditional homebuyers.

The median purchase price for investors was approximately $295,000, compared to $380,000 for traditional buyers. That’s a 22.4% discount.

This difference illustrates something I’ve believed for years: investors who understand how to evaluate properties, negotiate, and identify opportunities don’t necessarily need a booming housing market to make money. In fact, some of the best opportunities emerge when traditional buyers become less active.

Where Investors Are Finding the Best Opportunities

Not surprisingly, investors are concentrating their purchases in markets where property prices are relatively affordable and rental demand remains strong.

Memphis, Tennessee, leads the country in investor activity. Investors purchased approximately one out of every five homes sold, paying a median price of just $126,500. Traditional buyers paid approximately $250,000.

Other markets attracting significant investor interest include:

These price differences are substantial. Investors are purchasing properties at discounts ranging from approximately 26% to more than 50% compared to traditional buyers.

I see two primary reasons investors are gravitating toward these markets.

First, many Midwest markets offer relatively low acquisition costs, which can make it easier to generate positive cash flow from rental properties. Lower purchase prices also reduce the amount of capital required to get started.

Second, several Sun Belt markets have experienced an increase in housing inventory, creating more competition among sellers and giving investors additional negotiating leverage.

Both regions also offer opportunities to invest in markets with established employment centers, relatively affordable housing, and demand from renters.

However, I wouldn’t automatically assume that a lower purchase price makes a market a good investment. Population trends, employment growth, rental demand, property taxes, insurance costs, and neighborhood conditions still matter. A $100,000 rental property that sits vacant or requires excessive maintenance isn’t necessarily a better investment than a $150,000 property in a stronger neighborhood.

Why High Interest Rates Can Create Opportunities for Investors

One of the biggest advantages investors have in today’s market is that we’re not competing with the same buyers who dominated the market when mortgage rates were 3%.

When interest rates rise, affordability becomes a bigger obstacle for traditional homebuyers. Higher monthly payments eliminate some buyers from the market, while others decide to postpone purchasing altogether.

That creates several opportunities for investors.

1. Less competition from traditional buyers

When fewer retail buyers are actively purchasing homes, investors have a better chance of negotiating favorable deals. Properties that might have attracted multiple offers in a competitive market may now sit for weeks or months.

This is particularly important when looking for distressed properties, outdated homes, inherited properties, and houses requiring substantial repairs. These properties aren’t necessarily attractive to traditional buyers who need conventional financing and prefer move-in-ready homes.

2. More negotiating power with motivated sellers

Higher interest rates have also created a lock-in effect. Homeowners with mortgages carrying interest rates of 3% or 4% are reluctant to sell and give up their inexpensive financing.

As a result, many homeowners who don’t have a compelling reason to sell are staying put.

However, not everyone has that luxury. Financial difficulties, job relocations, inherited properties, divorce, and deferred maintenance can force homeowners to sell regardless of market conditions.

These situations can create opportunities for investors who have the cash, financing, and experience to purchase properties that other buyers might avoid.

3. Greater opportunities to purchase below market value

I believe one of the most important advantages of being an investor is having multiple exit strategies.

A property that doesn’t make sense as a retail purchase might still be an excellent investment if I can acquire it at the right price.

For example, I might purchase a distressed property, renovate it, and sell it to a retail buyer. Alternatively, I could refinance it and hold it as a long-term rental. Depending on the property and location, I might also consider a mid-term or short-term rental.

The key is buying at a price that provides enough equity and flexibility to make multiple strategies possible.

I generally look at the after-repair value, renovation costs, carrying expenses, and potential rental income before determining what I’m willing to pay. I don’t want to depend on appreciation to make a deal profitable.

Why Distressed Properties Are Particularly Interesting

Another opportunity worth watching is the number of properties that traditional buyers simply aren’t equipped to purchase.

Many retail buyers depend on conventional financing, which means the property must meet certain condition and appraisal requirements. Significant deferred maintenance, structural problems, water damage, or other deficiencies can make financing difficult or impossible.

Investors don’t have those same limitations if they have access to appropriate financing and the ability to manage renovations.

This is where experienced investors can find opportunities.

I’ve spent years purchasing properties that needed substantial work. In many cases, the competition is considerably smaller because most retail buyers don’t want to deal with contractors, renovation budgets, permitting, and unexpected repairs.

Of course, distressed properties come with additional risks. I need to account for those risks in my purchase price rather than assume every problem can be fixed economically.

The biggest mistake an investor can make is paying too much for a property simply because it looks like a bargain.

What Happens If Mortgage Rates Stay Above 7%?

I think investors could continue gaining market share if mortgage rates remain elevated.

Traditional buyers are particularly sensitive to mortgage payments, and even a relatively small change in interest rates can significantly affect purchasing power.

Investors, on the other hand, evaluate properties based on their potential returns rather than simply whether they can afford the monthly mortgage payment on a primary residence.

That doesn’t mean higher interest rates are necessarily good for investors. Financing costs, insurance, property taxes, and renovation expenses still have to make sense.

However, higher rates can reduce competition and create opportunities to negotiate better acquisition prices. Sometimes the savings on the purchase price can more than compensate for the additional cost of financing.

I also think investors who have access to private capital, cash, or institutional investment commercial loans may have an advantage over buyers who depend on traditional mortgage financing.

This Is a Market for Disciplined Investors

I’ve been investing in real estate since early 2002, and I’ve seen how dramatically market conditions can change. Some of the most competitive buying environments are also the most difficult times to find properties that produce attractive returns.

Today’s market is different.

Higher mortgage rates have reduced retail buyer demand, but that doesn’t mean housing demand has disappeared. People still need places to live, and rental demand remains an important part of the equation.

I’m particularly interested in markets where affordable housing, employment opportunities, and rental demand intersect. Birmingham is a good example of the type of market where I believe investors can still find opportunities if they’re disciplined about their acquisitions.

My strategy hasn’t changed. I want to buy properties below market value, create equity through renovations when appropriate, and have at least two potential exit strategies before committing to a purchase.

I’m not interested in buying properties simply because they’re cheaper than they were last year. I want properties that make financial sense based on today’s prices, rents, financing costs, and operating expenses.

I also wouldn’t assume this buyer-friendly environment will last forever. If interest rates decline and traditional buyers return to the market, competition could increase quickly.

My advice is to use this market to your advantage. Build relationships with wholesalers, agents, attorneys, property managers, and other investors. Keep your financing in place, know your numbers, and be prepared to move when the right opportunity comes along.

The investors who consistently make money aren’t necessarily the ones buying the most properties.

They’re the ones who know what to buy, what to pay, and when to walk away.