Key facts
- Individual investors own 59% of US rental properties, representing 32% of rental units.
- LLPs, LPs, and LLCs own 21% of rental properties, accounting for 43% of rental units.
- The median capital improvement expenditure per rental unit in 2023 was $900.
- Section 1031 exchanges can allow investors to defer capital gains taxes on property sales.
Individual investors own the majority of rental properties in the U.S., playing a crucial role in maintaining and modernizing the nation's housing stock, according to data from the 2024 Rental Housing Finance Survey sponsored by the U.S. Department of Housing and Urban Development and the U.S. Census Bureau. While large institutional investors focus on commercial assets and multifamily communities, individual investors collectively shape housing quality, neighborhood stability, and rental supply through their decisions to purchase, renovate, and reinvest.
The survey indicates that individual investors own approximately 59% of rental properties, which comprise about 32% of all rental units. In contrast, entities like LLPs, LPs, and LLCs own 21% of properties but account for a larger share of units at 43%. Other ownership types, including trusts and REITs, make up the remainder.
Challenges such as elevated interest rates, rising insurance premiums, tight lending standards, and increasing property taxes can make it difficult for these individual investors to continue reinvesting in their properties. Without access to capital, sound planning, and appropriate financial strategies, investors may postpone acquisitions, defer improvements, or exit the market, potentially impacting housing quality and availability.
Strategies like Section 1031 exchanges can help investors defer capital gains taxes when repositioning appreciated property, allowing them to reinvest equity. The survey also found that about 79% of rental properties had capital-improvement expenditures in 2023, with a median spending of $900 per unit. These investments are vital for improving housing quality and preserving rental inventory, but require access to capital and financial tools.
An integrated approach to financing, insurance, tax planning, and legal considerations is increasingly necessary for investors to navigate the current market effectively and make informed decisions that contribute to neighborhood stability and a resilient rental market.