How Small Investors Keep Buying in a Market First-Time Buyers Cannot Afford

The central housing story of 2025 has been defined by what prospective homeowners cannot do. 

They cannot find affordable entry-level inventory. They cannot absorb mortgage rates that remain elevated. And they cannot break through the financial barriers that have pushed the median age of first-time buyers to 40, which is the highest age since the National Association of Realtors began tracking the figure in 1981. First-time buyers now represent only 21 percent of all home purchases, the lowest share ever recorded according to NAR.

Yet, alongside this widely reported affordability crisis is another trend that has quietly reshaped the single-family market. Investors have been purchasing a growing share of available homes, and, contrary to public perception, these buyers are not primarily large institutional operators. They are overwhelmingly small, individual landlords. Investors bought nearly 27 percent of all U.S. homes sold in the first quarter of 2025, the highest proportion in at least five years, according to a report by BatchData. 

This divergence raises an important question: How are mom-and-pop landlords able to continue acquiring homes in the same market that has shut out so many would-be first-time buyers?

A clearer picture emerges when examining who actually owns America’s rental housing. Despite narratives about corporate landlords, small investors account for an enormous share of the nation’s rental stock. Landlords who own 10 or fewer properties control more than one-third of all U.S. rental housing units, according to the Urban Institute. In California, the trend is even starker. Nearly 19 percent of the state’s homes are now investor-owned, and roughly 90 percent of those investors are those holding no more than 10 properties, according to data cited by the Orange County Register.

Understanding how these small landlords are able to buy reveals several structural differences between their position and that of the typical renter trying to become a homeowner. 

For one, many small landlords are not new buyers. They tend to be older, own their primary residence, and have built equity over time. They often tap that equity to fund down payments or make all-cash offers. Roughly 26 percent of all home purchases in 2025 were all-cash transactions, according to NAR analysis and industry reports, and investors are significantly more likely to rely on cash or equity-based financing. This financing flexibility allows small investors to sidestep high mortgage rates that would render the same purchase impossible for a first-time buyer.

Geography also plays a significant role. Small investors are not typically competing for high-priced coastal starter homes. Instead, they are buying in more affordable regions where the rent-to-price ratio still produces reliable cash flow. Mom-and-pop investors have been increasingly active in the Midwest and the South, where acquisitions remain financially viable even at elevated interest rates, according to Realtor.com data. A renter in Los Angeles facing a $700,000 entry-level home is not shopping in the same universe of properties as an investor acquiring modest single-family homes in Ohio, Missouri or Alabama. The affordability equation is fundamentally different in those markets.

Small landlords have also benefited from steadier rent performance than many anticipated. Mom-and-pop landlords maintained on-time payment rates in the mid-80 percent range throughout the pandemic, helped by stimulus measures and emergency rental assistance, according to an Urban Institute analysis. As the rental market rebounded in 2022 and 2023, conditions improved further. Urban Institute notes that median asking rents surpassed $2,000 in 2022 after a 15 percent annual increase, which strengthened returns enough to pull many small landlords back into the purchase market.

These landlords also operate on longer time horizons. It is a slow and steady wealth-building strategy. A property that generates modest positive cash flow and long-term appreciation is often sufficient, even if market conditions appear challenging in the short run.

Another important distinction is the type of properties small landlords are willing to buy. These investors are more likely to acquire older, smaller or more modest homes that require hands-on management, according to Harvard’s America’s Rental Housing 2024 report. This makes small independent landlords an essential provider of lower-cost housing by owning properties that might not appeal to many first-time buyers. The homes these landlords purchase may be overlooked by traditional buyers, difficult to finance under standard mortgage guidelines, or simply less desirable for owner occupancy.

All of this contributes to the paradox that shaped the 2025 housing market. As policymakers and industry leaders look ahead to 2026, the resilience and influence of mom-and-pop landlords deserves far more attention. They supply the homes that millions of renters rely on. They stabilize neighborhoods. They absorb the spillover demand created when homeownership becomes unattainable. 

And they will continue to play a decisive role in shaping the rental market as long as structural barriers keep first-time buyers on the sidelines and small investors retain the financial flexibility and long-term perspective that enable them to keep purchasing.

Michael Lucarelli is the founder and CEO of rental software provider RentSpree.