Rental investors eyeing new acquisitions in 2026 with an increased emphasis on cash-flow discipline and market due diligence likely have not overlooked Midwestern metros. A new report forecasting local housing markets best positioned to support strong rental returns in 2026 says they should not.
But the pursuit of stronger returns comes after a year of market adjustment for many rental investors. Rent appreciation slowed to 15-year lows to close out 2025. Compounded with climbing vacancy rates and higher financing costs, that translated into a range of pressures on profitability.
Rental yields subsequently declined over the course of 2025, according to an analysis published this week by real estate analytics firm Attom, which reported that “drops in profitability come despite rent increases outstripping home price increases in more than half of counties.”
“Many landlords have been able to offset higher acquisition costs with rent growth, but returns are tightening in a majority of counties,” said Rob Barber, CEO of Attom, in commentary accompanying the report.
Though softening rents are rising faster than home prices in 55% of the 416 U.S. counties Attom analyzed, higher property values driving up acquisition costs compressed overall potential rental yields in 54.8% of surveyed markets in 2025. Local wage growth, which provides a basis for rent growth projections relative to supply levels, rose more quickly than rents and home prices in about two-third of counties Attom examined.
Despite tenants’ wage gains, high home prices and borrowing costs have locked many renters out of homebuying at the same time that affordability challenges cap investors’ ability to raise rents in some markets much further.
“Investors will need to be more selective, focusing on markets where rent growth and affordability trends continue to support strong returns,” added Barber.
U.S. counties that have the highest potential rental yields for three-bedroom apartments in 2026, according to Attom, are St. Clair County, Ill., at 14.5% potential yield; Mobile County, Ala., at 13.6%; Peoria County, Ill., at 12.5%; St. Louis County, Minn., at 11.6%; and Trumbull County, Ohio, at 11.5%.
Among counties with populations exceeding 1 million people, the highest potential 2026 yields were projected in Suffolk County, N.Y., at almost 11%; Cook County, Ill., at 9.8%; Cuyahoga County, Ohio, at 9.5%; Harris County, Texas, at 8%; and Oakland County, Mich., at 7.8%.
The real estate investor market is typically split along the fix-and-flip investor cohort, who turn a profit on reselling renovated properties, and rental property portfolio managers. Outlooks for acquisitions this year are mixed across groups, but flippers generally exhibit stronger optimism heading into the spring despite a tougher pricing climate.
“As rental yields tighten nationwide, investors are being forced to think beyond price and rent growth,” said Kyle Concannon, head of product and wholesale operations at investor-lender Constructive Capital, sharing his reaction to Attom’s report with Scotsman Guide. He emphasized that a holistic investing strategy responds to volatile economic conditions.
Investor activity nevertheless remained resilient last year, averaging between 80,000 and 100,000 monthly purchases, according to Cotality. Separate reporting from Redfin indicates investor activity slowed in the fourth quarter, however, amid rising uncertainty linked to the Trump administration’s discussion of a limited rental investor ban.
Amid what experts in the real estate lending industry have described as “fairly unpredictable” market conditions, pockets of investment opportunities are emerging, in addition to opportunities for adopting hybrid investing strategies. As flippers have increased difficulty selling for projected after-repair-values, more are eyeing rentals as a potential holding strategy.
“Sometimes it’s the primary strategy and sometimes it might be the secondary strategy,” explained Justin Land, CEO of investor-lender Merchants Mortgage, in a recent conversation with Scotsman Guide.
“But given market conditions,” he said, “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.”
