“It could be a tactic to close quickly, a speculative bet that the seller underpriced the home, or just a lack of local knowledge that leads to overestimating value or entering a bidding war,” he said.
While overpaying can be offset by long-term appreciation, most investors are focused on immediate cash flow. Mega investors, in particular, can absorb short-term losses due to the scale of their portfolios. Smaller investors tend to compensate through annual rent increases, Cotality said.
Investor overpayments have contributed to a 2.3% year-over-year increase in national rents, according to Cotality. But rent growth has slowed below pre-pandemic 10-year averages, signaling that relying on rent hikes to offset premiums may not remain sustainable.
This creates an imbalance between purchase price and cash flow for most investor types—with one notable exception: small investors. These mom-and-pop landlords, who make up roughly 14% of the investor market, remain resilient. In fact, they are purchasing the largest share of investment properties in the top 20 U.S. metro areas.
Even in high-cost markets like Los Angeles, small investors are seeing gains. Rents in the metro rose 3.1% between July 2024 and July 2025, and low transaction volume suggests that investment properties are being readily absorbed into the city’s growing rental market.
Source: GlobeSt.
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