What’s On the Minds of Today’s SFR Real Estate Investors?
Published November 8, 2024Share this article
The single-family rental, or SFR, market is always evolving. Collecting data and researching players in the market provides valuable context for understanding how landlords see the property investment landscape. That's why we partnered with ResiClub, a news and research platform focused on the U.S. housing market, to conduct our inaugural Real Estate Investor Survey.From October 8 to October 21, 2024, we surveyed 284 rental property owners to gather the latest data on the property investment market. In this blog, we’ll highlight some key findings.
When it comes to their goals, a majority of investors prioritized maximizing cash flow (58%), followed by maximizing long-term appreciation (23%) and minimizing the time and effort spent on management (17%).However, there’s a sense of caution regarding rental income increases. When asked about their expectations for rental income compared to expenses over the next three years, 41% believed it would remain about the same, 35% anticipated slower growth than expenses, and only 24% expected faster growth.These numbers indicate that investors are adopting a somewhat conservative stance toward their portfolios, likely influenced by factors such as rising interest rates, political uncertainty, and increasing regulations. With a focus on maintaining or exiting properties rather than pursuing growth, investors seem to be responding to what they perceive as a volatile market. The strong emphasis on cash flow, coupled with a preference for minimizing time and effort on property management, points to a growing interest in passive income strategies.
Furthermore, 31.3% of investors expressed strong concerns about potential increases in income and capital gains taxes related to their rental properties, with an additional 40.7% saying they were “somewhat concerned” about these increases.The pandemic caused significant disruptions to the market, and these challenges were reflected in investors' survey responses. Heightened risk assessments by insurers, as well as an increase in replacement costs and other factors, led to an uptick in insurance costs, while the rise in maintenance costs likely stemmed from delayed repairs and supply chain disruptions. Additionally, concerns over potential tax hikes highlight a greater sense of unease about the broader U.S. economic backdrop, a sentiment that has persisted since the pandemic's onset.
When it comes time to sell, 32.2% plan to use a tax-deferred exchange (such as a 1031 or 721 exchange) to minimize tax liabilities. The 721 exchange is unique in that it allows investors to exit landlord responsibilities entirely while maintaining passive income.The desire of many investors to hold on to their properties longer to avoid potential penalties suggests a cautious approach to tax planning. This reflects a broader effort to steer clear of unfavorable tax consequences in the short term. The 721 exchange in particular is gaining attention as an attractive option here, offering a strategic way to preserve investment in real estate as well as passive income, while enabling a full retirement from property management.
When asked to elaborate on these concerns, 48.4% of investors believed that heightened local regulations would drive up costs for landlords, making it more likely that owners would sell their properties. An additional 18.1% agreed that increased regulation would lead to higher costs for landlords, but felt this would not influence investors’ decisions to sell.Meanwhile, 33.1% reasoned that the cost increases would be absorbed by tenants, rather than affecting landlords' bottom lines.Many investors see regulatory burdens as a potential trigger for divestment, indicating a shift toward more cautious or defensive strategies. However, the fact that a third of investors believe increased costs would be passed on to tenants suggests they view market dynamics, such as rising rents, as a way to alleviate some of the financial pressure landlords may experience from higher operating expenses.
The results showed that 52.9% of investors nationwide planned to vote Republican, while 19.4% were leaning Democrat.The breakdown in local elections was similar, with 56% of investors intending to vote Republican and 19.1% favoring the Democratic Party.These numbers suggest a stronger alignment with conservative policies at the federal level, likely driven by investor concerns about taxation, regulation, and economic policies typically linked to the Republican Party. The consistency in preferences across both federal and local elections indicates that investors generally favor policies associated with the current platforms of the Republican Party at all levels of government.
Plans and Goals
Regarding near-term property plans, 51% of surveyed investors expressed a greater focus on maintaining or exiting their portfolios rather than seeking growth.When it comes to their goals, a majority of investors prioritized maximizing cash flow (58%), followed by maximizing long-term appreciation (23%) and minimizing the time and effort spent on management (17%).However, there’s a sense of caution regarding rental income increases. When asked about their expectations for rental income compared to expenses over the next three years, 41% believed it would remain about the same, 35% anticipated slower growth than expenses, and only 24% expected faster growth.These numbers indicate that investors are adopting a somewhat conservative stance toward their portfolios, likely influenced by factors such as rising interest rates, political uncertainty, and increasing regulations. With a focus on maintaining or exiting properties rather than pursuing growth, investors seem to be responding to what they perceive as a volatile market. The strong emphasis on cash flow, coupled with a preference for minimizing time and effort on property management, points to a growing interest in passive income strategies.Concerns
The COVID-19 pandemic undoubtedly affected the rental property landscape. We wanted to understand how landlords and investors see risk to their investment in a post-COVID world. The responses were revealing, with 29.2% of investors citing increased insurance costs as their top issue, followed by rising maintenance costs (23.9%), higher property taxes (18.1%), and more late-paying tenants (14.4%).Furthermore, 31.3% of investors expressed strong concerns about potential increases in income and capital gains taxes related to their rental properties, with an additional 40.7% saying they were “somewhat concerned” about these increases.The pandemic caused significant disruptions to the market, and these challenges were reflected in investors' survey responses. Heightened risk assessments by insurers, as well as an increase in replacement costs and other factors, led to an uptick in insurance costs, while the rise in maintenance costs likely stemmed from delayed repairs and supply chain disruptions. Additionally, concerns over potential tax hikes highlight a greater sense of unease about the broader U.S. economic backdrop, a sentiment that has persisted since the pandemic's onset.721 Exchange
Due to apprehensions about increases in capital gains taxes, roughly half of investors (50.1%) said they would likely hold on to their properties longer to avoid penalties.When it comes time to sell, 32.2% plan to use a tax-deferred exchange (such as a 1031 or 721 exchange) to minimize tax liabilities. The 721 exchange is unique in that it allows investors to exit landlord responsibilities entirely while maintaining passive income.The desire of many investors to hold on to their properties longer to avoid potential penalties suggests a cautious approach to tax planning. This reflects a broader effort to steer clear of unfavorable tax consequences in the short term. The 721 exchange in particular is gaining attention as an attractive option here, offering a strategic way to preserve investment in real estate as well as passive income, while enabling a full retirement from property management.Regulations
Investors expressed considerable concern about the potential impact of increased regulations on landlords, with 80.6% reporting they were either "very" or "somewhat" worried.When asked to elaborate on these concerns, 48.4% of investors believed that heightened local regulations would drive up costs for landlords, making it more likely that owners would sell their properties. An additional 18.1% agreed that increased regulation would lead to higher costs for landlords, but felt this would not influence investors’ decisions to sell.Meanwhile, 33.1% reasoned that the cost increases would be absorbed by tenants, rather than affecting landlords' bottom lines.Many investors see regulatory burdens as a potential trigger for divestment, indicating a shift toward more cautious or defensive strategies. However, the fact that a third of investors believe increased costs would be passed on to tenants suggests they view market dynamics, such as rising rents, as a way to alleviate some of the financial pressure landlords may experience from higher operating expenses.Politics
Our polling was conducted just weeks before the November general election, asking investors about their political preferences on both the federal and local levels.The results showed that 52.9% of investors nationwide planned to vote Republican, while 19.4% were leaning Democrat.The breakdown in local elections was similar, with 56% of investors intending to vote Republican and 19.1% favoring the Democratic Party.These numbers suggest a stronger alignment with conservative policies at the federal level, likely driven by investor concerns about taxation, regulation, and economic policies typically linked to the Republican Party. The consistency in preferences across both federal and local elections indicates that investors generally favor policies associated with the current platforms of the Republican Party at all levels of government.Additional Insights
Elsewhere, our findings highlighted attitudes toward institutional landlords, frequency of rental property repairs and capital improvements, and more.Why This Matters
Every decision related to your investment property is crucial—whether you're aiming to maximize returns, meet tenant obligations, or transition away from management altogether. The outcomes of these choices will impact you both now and in the future, so it's essential to assess each one from multiple angles.We conducted the Flock Homes-ResiClub Real Estate Investor Survey to help landlords like you navigate the property investment landscape. You can access the full report here.Consider Flock
If your goal is to retire from landlord duties while deferring taxes on a sale, we offer an elegant tax and retirement strategy. To date, we've helped over 150 clients utilize the 721 exchange, enabling them to leave behind the hassles of property management without incurring capital gains taxes and while maintaining passive income. You can exchange your rental property for shares in a managed portfolio of homes, receiving regular cash flow as your account appreciates with portfolio growth.Interested? Learn more now.Landlords, retire and minimize taxes.
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