For his part, Robert Greenberg says the urgency with which many real estate investors may now need to pivot to a different exit strategy is a direct impact of market conditions that even veteran operators like himself are finding difficult to navigate.
“It was really hot and you could do no wrong. As soon as you could get something ready for market, you could sell it,” says the chief strategy officer of Ternus Lending, recalling the ease with which investors operated back in 2020 and 2021. “That’s changed, and it’s changed in almost every market.”
Over the past two years, real estate investors have largely propped up the single-family purchase market as poor affordability sidelined traditional homebuyers. As the post-pandemic housing market has gradually rolled over, now the deals that investor-lenders covet are not those that are easier to close but those that are easier to exit.
For investors that Ternus Lending funds with short-term residential transition loans (RTLs) for fix-and-flip projects, a “flexible exit” entails penciling out the “flip” portion as a debt-service coverage ratio (DSCR) rental loan, in case the projected resale offers come in low.
“It’s that much more attractive both to the lender and to the investor if you’ve got some optionality in terms of what you might do with it,” Greenberg explains. “If you can get the deal to pencil both as a fix-and-flip and a buy-and-hold, you have that much more confidence that the deal is a deal worth doing.”
Shifting market fundamentals
Though average profit margins for flippers have been thinning for the past decade, high home prices, elevated input costs and challenging resale conditions turned a triple play on flipper profits in 2025. Kyle Concannon, vice president of Constructive Capital, a wholesale lender of short-term RTLs, recently described these conditions to Scotsman Guide as “arguably more punishing than the crash of 2008.”
In response, investors and investor-lenders have entered 2026 eager to hedge their exposure.
Despite margin pressures, investors claimed 3 in 10 single-family home sales in 2025, according to a monthly report on investor activity published last week by Cotality, a real estate market analytics firm. Averaging between 80,000 and 100,000 monthly purchases, investors’ monthly purchase share was between 29% and 32% throughout the year.
“This resilience is largely attributed to the prevalence of all-cash offers, which allow investors to bypass elevated interest rates and secure deeper discounts,” read the Cotality report, with added context from the principal economist at the company, Thom Malone.
“The current landscape differs significantly from the pandemic-era surge, which was fueled by rapid price appreciation,” says Malone, who now observes that “strong rental demand and the ability to secure acquisitions below list price” are driving deals.
As flippers were shedding profits, stalling single-family rent growth and climbing vacancies also hit the margins of rental investors last year. Shifting market fundamentals — and macroeconomic uncertainties pegged to inflation, labor markets and geopolitical tensions — have increased calls for what industry experts call “cash-flow discipline” in 2026.
Focusing on local dynamics
Justin Land calls current housing market conditions “fairly unpredictable,” and structuring deals for a successful outcome this year now requires closer attention to exit strategies before the deal is even closed. The CEO of KKR-owned Merchants Mortgage says he hears investors asking for optionality on the back end of their projects.
“Sometimes it’s the primary strategy and sometimes it might be the secondary strategy,” Land explains to Scotsman Guide, “but given market conditions, if you can go into a construction loan or rehabilitation loan and know that you may have an option to sell the property, and you also have an option to rent it and put a long-term loan on it and hold it in your portfolio, that gives you a lot of comfort.”
Assessing deals for a hybrid exit strategy must be market-specific, though, working best in areas “that have a little bit lower housing prices,” he believes. Depending on market dynamics, Land says a flip-or-rent strategy “is one that we we’ve heard about from our borrowers, and we’ve seen more of in our portfolio that we think we will continue to see in 2026.”
After a “fix” is completed, flippers typically want to sell the property as soon as possible, both to settle with lenders and contractors and recycle equity into their next projects. Having to hold a completed flip that is not generating offers at the projected after-repair value (ARV) — the value on which RTL loans are underwritten — can put investors in a bind.
Land says that acquiring properties to flip in higher-priced markets typically reduces the likelihood of refinancing a rehabbed property into a DSCR rental loan, but that the rental exit in appropriate circumstances can be leveraged as a shorter-term hold strategy until sales conditions improve.
“Right now, the rate environment is good enough that they can place the long-term debt on a lot of these properties, but then there’s also the anticipation that the rates might go down in the future,” he says. “That would be additional profit or upside, if rates go down, when then they would be able to refinance at a lower rate down the road.”
A recent survey by wholesale investor-lender RCN Capital highlights mixed outlooks for investor acquisitions in 2026, underscoring a widening confidence gap between the fix-and-flip and single-family rental cohorts of the broader investor market.
Almost 45% of rental-investor respondents said they do not plan to buy any properties in 2026, compared with 26% of flippers. That divergence is supported by 52% of flippers who expect market conditions to improve this year, compared to just 26% of rental investors.
Lack of lender proactiveness
While flippers reported much more confidence in the investment opportunities 2026 may present, those operating under the assumption that a rental exit strategy could trim their losses on a disappointing resale might consider the wariness that rental investors reported. Affordability pressures have maintained a deep bench of single-family renters nationwide.
However, as single-family rents and home prices cool simultaneously, flippers may inadvertently find themselves trying to catch not one, but two falling knives before the “fix” is even finished. As demand from investors for optionality increases amid difficult-to-read market conditions, Greenberg warns that most lenders are likely not actively helping their flipper clients assess the variety of scenarios for a post-renovation pivot to a rental.
“Most of the time, the loan officer that you might be working with is trying to close you on whatever the investor is telling them you want to do,” says Greenberg. “They’re not necessarily helping you look at alternative ways to structure the deal for more optionality.”
Take this scenario, for example:
- A flipper acquires a property in Chicago with a $150,000 loan.
- They put $50,000 of their own money into the property for an after-repair value of $270,000.
- They could sell the flip for $290,000 and try to maximize the profit, though selling for $250,000 would still yield a reasonable return.
- If they can’t sell the flip for more than $200,000, however, the investor is stuck carrying around an appraisal for $270,000 as holding costs slowly erode their total potential profit.
- Refinancing into a long-term rental loan means they would likely need to charge about $2,700 in monthly rent — the median single-family rental price in Chicago last fall — to ensure the debt service covers the mortgage at a ratio higher than 1.0.
Market risks cut both ways for flippers, which makes “optionality” or “flexible exits” more effective as a risk-management strategy rather than a crisis-response strategy. But the effective ceiling for any flip-turned-rental is how much the investor can charge as monthly rent in a given locale.
That, says Greenberg, is the risk to investors — and lenders underwriting their deals — of pursuing opportunities that carry higher profit potential on the sales side.
“How many lenders are actually helping you think about underwriting your deal so that you have that that kind of optionality, are underwriting dual scenarios with borrowers so they can see the trade-offs early?” posits Greenberg. “I would say very, very few.”
