Where are people buying investment properties?

In the heated residential real estate market of the last 2 years, real estate investors have faced fierce competition and rising prices. While many prospective home buyers 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 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.

Qualifying for a mortgage on an investment property is more difficult than for a principal residence, which is one reason why many rental purchases are made with cash. While the typical property value for an investment purchase is lower than for a principal residence, lenders typically require larger down payments and lower debt-to-income (DTI) ratios and command higher interest rates on the loan. In 2020, the mortgage for an investment property had a median down payment of $60,000 and a median interest rate of 4.0%, compared to $50,000 and 3.1% for a residence—even though residences had a higher median property value.

For investors who rely on financing to purchase property, most of the top locations for investment properties are found in the South. Arkansas (19.4%), Oklahoma (18.5%), and several surrounding states have high shares of investment property loans as a percentage of all purchase loans. 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.

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At the metro level, cities in these states are also among the most popular locations for mortgaged investment properties. But the list also includes some pricier cities where property values are growing rapidly, like Los Angeles, Austin, and Nashville.

Here are the U.S. metros where people are mortgaging investment properties.

Large metros 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%

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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%

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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%

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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%

Detailed Findings & 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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