{"id":185878,"date":"2025-12-01T14:45:36","date_gmt":"2025-12-01T21:45:36","guid":{"rendered":"https:\/\/www.biggerpockets.com\/blog\/?p=185878"},"modified":"2025-12-01T14:45:40","modified_gmt":"2025-12-01T21:45:40","slug":"how-local-laws-have-made-life-harder-for-small-investors","status":"publish","type":"post","link":"https:\/\/www.biggerpockets.com\/blog\/how-local-laws-have-made-life-harder-for-small-investors","title":{"rendered":"How Local Laws Have Made Life Harder For Mom-and-Pop Investors\u2014And What to Do About It"},"content":{"rendered":"\n

Many small investors feel as if they are swimming against the tide. Political and regulatory headwinds are shifting in favor of owner-occupancy, while deep-pocketed corporate buyers scoop up swathes of housing. On top of that, rising expenses, such as maintenance and taxes, make it harder to turn a profit.<\/span><\/p>\n\n\n\n

When \u201cProtecting Homebuyers\u201d Sidelines Small Investors<\/span><\/h2>\n\n\n\n

Investors are finding it particularly tough going in cities where strict rules on <\/span>short-term rentals<\/span><\/a> are squeezing out landlords, according to a recent analysis from<\/span> Neighbors Bank<\/span><\/a>. And the survey found that first-time homebuyers accounted for 69% of mortgages on starter homes (usually smaller, less expensive homes with three bedrooms) in 2024, while investors made up 31%. <\/span><\/p>\n\n\n\n

Stringent short-term rental laws in Denver, Seattle, and Los Angeles have made it tough for investors to buy there, giving homeowners an advantage. In Denver, owner-occupants accounted for 84% of starter home purchases, and investors accounted for just 16%. Seattle and Los Angeles told similar stories, with homebuyers picking up 81% of starter homes. <\/span><\/p>\n\n\n\n

California also mandates that tenants, nonprofits, and owner-occupants have a 45-day window to match investor bids on certain foreclosed homes, further disadvantaging investors. However, the country differs widely in this regard. In Miami, where median home prices are around $500,000, investors account for 57% of all starter home purchases, the most in the survey, and first-time buyers 43%.<\/span><\/p>\n\n\n\n

“Affordability doesn’t exist in a vacuum,” Jake Vehige, president of mortgage lending at Neighbors Bank, who authored the report, told<\/span> Realtor.com<\/span><\/a>. “Two cities with similar home prices can have completely different outcomes, depending on how they regulate investor activity and protect owner-occupants.”<\/span><\/p>\n\n\n\n

Bigger Players, Thinner Margins<\/span><\/h2>\n\n\n\n

The 800-pound gorilla in the room, regarding who is entitled to what, is supply. With a limited number of homes, investors and homebuyers have to duke it out, with housing laws serving as the referee. <\/span><\/p>\n\n\n\n

U.S. single-family housing starts have recently fallen to near two-and-a-half-year lows, according to<\/span> Reuters<\/span><\/a>. Higher mortgage rates and weaker homebuilder confidence have dragged down the number of new homes <\/span>being constructed<\/span>. <\/span><\/p>\n\n\n\n

Earlier in the year, the<\/span> outlet<\/span><\/a> reported that tariffs <\/span>were expected<\/span> to raise construction costs by $10,900 per home, further disincentivizing builders. For existing landlords, elevated material costs increase repair costs, especially for those pursuing a <\/span>BRRRR<\/span><\/a> strategy.<\/span><\/p>\n\n\n\n

The challenge from Wall Street cannot be understated, either. Behemoths like the Blackstone-funded Invitation Homes have been<\/span> buying up single-family properties<\/span><\/a>. According to the Federal Reserve Bank of Philadelphia, the number of homes owned by Blackstone and similar firms increased from almost nothing in<\/span> 2010 to close to 400,000 by 2021<\/span><\/a>.<\/span><\/p>\n\n\n\n

In some burgeoning neighborhoods, such as the Bradfield Farms subdivision outside Charlotte, North Carolina, corporate landlords who paid in cash own 50% of the homes,<\/span> The New York Times<\/span><\/a><\/em> says. The <\/span>Times <\/span><\/em>reported that corporate landlords are more likely to raise rents, evict tenants, and under-maintain properties than smaller landlords, which shifts opinion against all landlords.<\/span><\/p>\n\n\n\n

Policy Shifts That Increase Costs and Shrink Flexibility for Smaller Landlords<\/span><\/h2>\n\n\n\n

Many cities, in a push for owner-occupancy and tenant protections, have made it increasingly difficult for smaller landlords financially. Rental registries, rent control, and <\/span>no-cause eviction<\/span><\/a> bans have squeezed landlords’ profit margins.<\/span><\/p>\n\n\n\n

The management platform<\/span> LandlordStudio<\/span><\/a> defined a landlord-friendly state, examples of which it listed as Texas, Indiana, Florida, Georgia, and Arizona, as one that is favorable to investors in the following categories:<\/span><\/p>\n\n\n\n