Despite several years of volatility in the housing market, the renovation and renovation sector – where investors renovate, reposition, and improve residential properties – has shown resilience and is poised for meaningful growth in 2026. Although recently recognized as a legitimate limited liability asset class, the underlying strategy is new. For decades, real estate professionals, private lenders, and banks have financed residential rehabilitation through short-term loans now commonly referred to as Residential Transition Loans (RTLs).
As we enter 2026, a confluence of factors – improving liquidity, stabilizing interest rates, potential asset growth, and improved cost volatility – sets the stage for increased investor activity. These conditions point to a market place where more funds can be properly invested, more projects can be completed, and much-needed housing supply can be delivered quickly to address America’s housing shortage. The industry can provide more profit and flourish in 2026 with continued careful management by all stakeholders.
Capital availability is increasing and improving
The capital landscape for fix-and-flip investors has changed dramatically from a decade ago, when financing options were limited, highly localized, and often very expensive. Institutional capital has now entered the RTL space at scale, bringing enhanced professional underwriting, industry teams, quality products, and increased access to capital for domestic investors. The continued development of the industry and surrounding funds has reduced prices for investors, and with interest rate cuts expected in 2026, borrowing costs may drop even further.
More affordable financing draws new entrants into the market, accelerates construction, and helps bring updated, move-in-ready homes to first-time and low-income buyers. With national lenders actively catering to RTL borrowers, fix-and-move investing is no longer a niche, but instead an established, risky part of the broader real estate financing system, and an opportunity for entrepreneurs across the country to combine local knowledge and hard work into successful businesses that can continue to grow.
Housing inventory is starting to loosen
For several years, the tight supply of housing has closed off opportunities for fix-and-roll investors. That dynamic may be starting to change. As interest rates ease, 2026 could see a gradual release of “foreclosed” assets as homeowners who refinanced at record lows during the crisis re-enter the market. Even a little softening in certain areas can produce a meaningful increase in the chances.
While increased inventory does not automatically translate into a buyer’s market, it does enable investors to be more selective, pursue higher quality projects, and compete less for distressed or poorly marketed properties. In regional housing markets suffering from aging or outdated stocks, the influx of investor capital is critical. Each property that is renovated or repositioned by the investor eventually becomes a new or improved property for the buyers or tenants.
Renovation maintains a building cost advantage over new construction
Homebuilders have spent the past few years navigating high material costs, supply chain delays, and tax uncertainty. Although some pressures remain, tax negotiations and the stability of material availability are improving, reducing the unpredictability of costs for both manufacturers and repairers.
Remedial projects avoid many of the costs and delays associated with ground construction – new rights-of-way, infrastructure connections, site approvals, and extended construction times. As a result, a smaller share of project costs are tied to raw materials, deadlines are shorter, and money turns around faster. That efficiency translates into lower management costs and predictable margins, which favors conservative investors. As new construction continues to face regulatory and cost-effectiveness issues, RTLs remain one of the most effective ways to deliver updated, livable homes at scale. Rezoning existing buildings (ie, turning 1 unit into a 2-unit, 2-unit into a 3-unit, etc.) also allows entirely new housing to be added within an existing extension, which happens much faster and more cost-effectively than building from the ground up.
Fix-and-flip investing thrives in most market cycles
The repair and maintenance industry is resilient to different market cycles and real estate environments. Unlike long-term strategies that rely on years of appreciation, renovation and renovation projects typically run 9-12 months from purchase to sale and add tangible value and utility to the infrastructure. This short period allows investors to be able to adapt to the market continuously and changing conditions, with opportunities to renew existing properties in any market.
Because value is created through improvements, structural improvements, cosmetic improvements, building renovations, and energy-efficient upgrades, profits are not tied to rising housing prices or a specific interest rate zone. In soft markets, investors often see the best opportunities to acquire. In strong markets, they benefit from strong exit prices. Still, the demand for renovated, code-compliant, move-in-ready homes remains.
This is why the repair and replacement investment strategy has remained for decades at the local level, and is now rising to mainstream institutional recognition. It sits at the intersection of private investment and public needs, moving older homes through the productive pipeline, creating business opportunities for entrepreneurs, providing local jobs, and delivering improved homes to end buyers in an efficient and reliable manner.
The time of industry has come
As funds become more plentiful, inventories loosen, costs stabilize, and institutional growth, the fix-and-flip and RTL industry is in for a critical period in 2026. Investors are helping tools, data, and analytics that didn’t exist a decade ago, benefiting from broader participation and competition, and re-creating money for lenders across the country. a much-needed supply that won’t take years to complete.
Fix-and-flip investing has become a fundamental contributor to the US real estate ecosystem. While careful management and risk mitigation by stakeholders is critical to future success, the next phase of growth is already underway.
Justin Land, President and CEO of Merchants, a leading independent lender to residential real estate investors.
This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners. To contact the editor responsible for this piece: [email protected].
