Tariffs are likely to have a ripple effect on the real estate market.

While proposed reciprocal tariffs are on a 90-day hiatus, real estate investors should anticipate their implementation and how they’ll impact our industry. Make no mistake, we’re not making this about politics. It’s just about doing our due diligence in ensuring investors are adequately prepared for whatever economic challenges come our way!

Because that, friends, is how we thrive in adversity.

Potential Tariff Outcomes for the Real Estate Market

For Turnkey SFR Investors

We’re going to cover two primary types of investors. Though they often overlap, they may see some practical differences resulting from tariffs. First, turnkey investors buy fully renovated or new properties with residents and management in place, aiming for passive income and minimal personal involvement.

Here are some turnkey considerations:

#1 – Higher Property Prices Due to Construction Cost Inflation

Tariffs on materials like lumber, steel, and appliances raise renovation and construction costs. As a result, investors may contend with higher acquisition prices and (potentially) higher renovation and repair costs if the tariffs remain in place. When running your numbers, err on the higher end of estimated costs.

#2 – Reduced Inventory

If tariffs strain rehab budgets, turnkey SFR supply may dwindle. Providers may need to be more selective and strategic with their projects. Of course, this certainly depends on the provider and where they invest. But remember—inventory has been tight. Investors must be attentive and diligent in going after the deals they want, because they won’t likely last. If you want to buy turnkey property, be prepared and agile!

#3 – Maintenance and CapEx Could Get Pricier

Higher costs for imported materials and parts mean more expensive long-term maintenance. For investors holding properties for 5 years or more, capital expenditure planning must account for inflation in repair/replacement costs for big-ticket items (roofs, HVAC, appliances).

Look at your timelines and plan accordingly.

#4 – Potential Upside: Rental Demand May Rise

Of course, these effects aren’t limited to turnkey investors. They’ll impact the housing market at large. And if tariffs raise housing prices and borrowing costs, more people will forgo home buying and continue to rent. This would increase occupancy stability and allow for modest rent growth over time. In turn, this would ease some of the tariff-related pressures on investors.

Further Reading: What It REALLY Means to Maximize Rental Property Cash Flow

Build-to-Rent (BTR) Investors

BTR investors are typically a subset of turnkey investors that focus on buying newly built SFRs designed exclusively for renters. “Regular” turnkey investors may dip into BTR and incorporate these properties into their portfolios.

#1 – Tariff-Driven Construction Cost Increases

Material and labor costs could jump due to tariffs, especially if they impact lumber, concrete, steel, and fixtures. This directly raises total development costs. Ultimately, this means higher acquisition costs and increased rental rates to compensate.

#2 – Permit and Pipeline Risk

Tariff volatility can make construction budgeting unpredictable, causing builders to pause or cancel projects mid-pipeline. Investors might face delays in the completion of properties, delaying cash flow. With these increased risks, you’ll want to consider whether buying during construction is right for you. At the same time, waiting could mean missing out altogether.

#3 – Strategic Advantage in Rent-Driven Markets

With homeownership becoming less accessible, professionally managed rentals can become the default “starter home.” BTR portfolios in areas with a strong job market and population growth (think Sun Belt) may benefit from resilient rental demand even as costs rise. After all, people need to live somewhere!

The norm may shift. Rentals will no longer be a “stepping stone” to homeownership, but a long-term arrangement replacing (increasingly rare) starter homes.

Strategic Moves for Investors

Now, we don’t say all this to scare investors. We’re just being honest with how the tariff situation could impact the market. It’s always better to prepare for the worst while expecting the best! So, with these possibilities in mind, how should real estate investors prepare?

• First: Lock in fixed-rate financing while rates are reasonable. If refinancing would be advantageous, consider doing so.
• Second: Work with turnkey providers or builders that pre-purchase materials or have strong supplier relationships. They will be less impacted by increased costs and supply chain issues.
• Third: Be conservative on underwriting—bake in higher maintenance costs and slower appreciation to stress test deals. Be mindful of your debt-to-income ratio. You don’t want to over-leverage.
• Fourth: Favor markets with high rent-to-price ratios and relative affordability. Expand your horizons by investing across a variety of markets.

Ultimately, our circumstances don’t define our ability to build wealth through real estate. While we may need to pivot our strategies, opportunities to strengthen your investment portfolio are there for the taking…if you know where to look!

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