The saying “what doesn’t kill you makes you stronger” applies doubly in real estate. Investors have proved themselves to be a hardy lot, not knuckling under against the headwinds of high interest rates, insurance costs, and house prices, forgoing short-term profits for long-term success, according to a new study.
The Q3 2025 Investor Sentiment Index released by RCN Capital and CJ Patrick Co reveals that most real estate investors retain a healthy dose of optimism about the future. Almost 50% believe that the housing sector will improve over the next six months.
“Market conditions for real estate investors continue to prove challenging, with stubbornly high financing rates, rising labor and materials costs, and soaring insurance premiums taking a toll on investor profit margins,” Jeffrey Tesch, CEO of RCN Capital, said in an RCN Capital press release.
That said, Rick Sharga, CEO of CJ Patrick Co., distilled the resilience of smaller investors—who comprise 90% of the residential investment market: “Compressed margins can be the difference between a comfortable lifestyle and financial distress.”
Pivoting From Flips to Ownership
To survive, the modern-day investor has pivoted from flipping to ownership, according to the study. While flipping homes makes for glamorous TV shows, rising costs have been a reality check for many investors who have chosen to ride the wave of unpredictability by holding on to their assets.
The Investor Sentiment Index found that 44% of respondents now identify primarily as rental investors, a marked increase from previous years, followed by flippers at 38% and wholesalers at 17%. Over half of the surveyed investors reported shifting their main investment approach, preferring stable cash flow from assets that they could deploy later.
Higher Costs and Regulation
Rising costs have been identified as the main concern for investors, according to the study. Home prices continued to rise in 2025, reaching new heights and slowing home sales, making refinancing difficult for investors trapped in higher-interest loans and flippers hoping to find homebuyers who remained out of the market.
Short-Term Rental Restrictions
Compounding the complexity of rising costs have been increased regulations by cities on short-term rentals, which have stripped landlords of an alternative outlet to conventional long-term rentals. It’s proven to be a contentious issue because landlords rely on the extra income to survive. At the same time, opponents of STRs claim they are depleting local housing stock.
New Orleans recently overturned a decision that outlawed “whole house” vacation rentals by absentee homeowners. “The neighborhoods are split on this,” New Orleans city council member Freddie King said at a hearing where a law was passed allowing only one house per block to rent to short-term guests, a decision made by a lottery.
“You might put me in a lotto and, just like that, I could lose my retirement income,” one woman told the city Council, adding that her financial survival depended on renting part of her house to vacation guests, which is more lucrative than having long-term tenants. “If I have to go back to long-term rental, I will have to sell my house.”
Insurance Costs
Rising insurance costs have been one of the biggest issues for landlords, particularly in rural areas and lower-income, vulnerable communities. “If it spreads further, it could threaten to end affordable housing development as we know it,” Frank Woodruff, the executive director of the Community Opportunity Alliance, a trade group representing nonprofit housing developers, told the New York Times.
Embracing Technology and Sustainability
With cash flow squeezed, using all available tools to eke out fine margins of profitability has been an essential feature of the modern-day small real estate investor. Increasingly, that means leveraging artificial intelligence (AI)-powered tools to help landlords and property managers streamline operations and identify opportunities more quickly.
A survey by management platform Baselane found that half of property management professionals either currently use AI tools or plan to by the end of 2025, with rent collection being a particular area of interest. Here, AI can help to streamline payments, improve cash flow reliability, and lower the costs of doing business.
Showdigs.com reports that large management software companies like Yardi Resident Screening and TransUnion’s ResidentID use AI to screen tenants.
In addition, larger apartment buildings have increasingly been embracing green technology upgrades and eco certifications to appeal to prospective tenants. An Emerging Trends report by commercial brokerage JLL found that cost pressures, along with concerns about reliance on fossil fuels amid tariffs, were prompting landlords to push for more sustainable energy sources.
According to Showdigs, smart energy management systems can achieve 10% to 30% savings in energy costs, but require a significant upfront outlay in older buildings.
Belt-Tightening Strategies for Smaller Investors in Turbulent Times
Run numbers conservatively
- Leave the fantastical repair and cash flow predictions for the wholesalers trying to sell you the deal. Run your numbers conservatively with worst-case scenarios in mind.
- Buffer in higher insurance costs. Old-school insurance numbers are old news. Get quotes before buying a deal to make sure your numbers still work—especially if you’re in a high-risk area. If the numbers don’t work, consider buying elsewhere.
Prioritize tenant retention and operational efficiency
- Strategize to maintain the tenants you have with longer leases, incentives for renewal, and staying in regular communication.
- Streamline maintenance routines and use tech tools like rent automation, mobile maintenance requests, and tenant portals. Continually examine expenses, and look for ways to improve them.
- Analyze your local market for rent growth, job creation, and property supply pipelines, and adjust accordingly.
- Setting investment criteria such as net operating income (NOI), cash-on-cash return, capital expenditure reserves, cap rate targets, and expense buffers will help you continually adjust your numbers to meet your goals. Don’t go into this blind.
Consider green tech to lower costs
- For some reason, eco-friendly or green tech is often seen as “too trendy” for small investors to consider. However, simple adjustments such as solar-powered irrigation and lighting systems, energy-efficient HVAC systems, smart locks, mobile payment systems, and even artificial turf can help reduce expenses.
Final Thoughts
Being disciplined, data-driven, and adaptable are the keys to surviving in any business right now, and real estate is no exception. The great thing about real estate is that demand never wanes. If there is an attractive product, there will be someone interested in renting it. Making all the numbers work is where these components come into play.
There is no one-size-fits-all solution for investors, as each has their own unique set of circumstances: a family member offering a low-interest loan with flexible terms, an institutional lender with defined criteria, or self-managing rather than outsourcing. If you can strategize how to survive the tough times, the good times will follow.
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