5 min read

3 Key Property Risk Factors for Real Estate Investment in 2022

Written By CAPE Analytics

An evolving US residential real estate market is bringing new urgency to understanding a trio of key property risk factors that could prove critical to making profitable investments in the year ahead.

Coming off 15 months of record home prices and rising sales volumes, investors, lenders, and others are already under pressure to snatch up the best investment opportunities amid dwindling inventories. But with the Fed signaling upcoming rate hikes, iBuyers, and institutional investors must now tread more carefully in a market that could see fewer buyers for their properties.

At the same time, billions in investment capital continues to bulk up portfolios of single-family rentals (SFRs). In 2021, investors and asset managers acquired a record 18% of all home sales—up from just 11% a year ago, according to Motley Fool. With rental rates expected to grow 7.1% in 2022, the acquisition spree isn’t likely to slow down soon.

Neither is the urban exodus set off by COVID-19. Today, the fiercest competition in the residential sector is being waged in cities with the largest influx of new residents. Think Phoenix, Las Vegas, Atlanta, Charlotte, and Jacksonville.

Put it all together, and the ability to assess issues that impact valuation and make faster, better investment decisions has never been more urgent. Here are three critical risk factors to take into account in the year ahead:


Property Condition: So Much More Than Curb Appeal

Is the structure sound? Are there driveway cracks? Does the roof have loose or damaged tiles? Are there signs of leakage or deteriorating gutters? Is there yard debris? The cost of repairs for these and other detriments can put the crunch margins on property flips—or the ability to collect optimal rental income. But the current market further compounds these risks.

The further away from core metros, the steeper any drop in home prices that might stem from rising interest rates, inflation, or other forms of economic heartburn. That’s double for any reverse migration back to major cities once COVID is better contained. But getting a high-fidelity understanding of property condition can be time consuming and costly using most traditional methods.

In 2022, look for savvier investors, traders, and portfolio managers to tap digital property intelligence sources that can help them quickly determine if target properties are in good condition, estimate rehab costs, or monitor existing collateral to ensure it remains in good condition.


Location Factors: Looking Beyond the Property Line

Risks specific to a particular property are one thing. But SFR firms and other investors looking to identify the best opportunities will also want to assess the condition of homes in the immediate vicinity, throughout the neighborhood, and across the city at large.

What if that pristine, three-bedroom Eichler sits next to train tracks—or in the shadow of a freeway overpass? What if there are bars just over the back fence?

Data on home price and rental trends, school districts, and other characteristics have long been factored into valuation models. But today, it is increasingly augmented with intel on surrounding houses, neighborhood crime rates, nearby traffic and accident patterns, as well as distance from freeways, noisy restaurants—anything that can help avoid costly mistakes.


Weather-Related Hazards: Outsmarting the Storm

It’s worth noting that the boom towns mentioned above are in Florida, the Southeast, and parts West that are prone to flooding, drought, or other weather-related catastrophes.

Or, as Redfin CEO Glenn Kelman puts it: “Buyers just keep marching into the jaws of destruction.”

In 2021, Hurricane Ida and 17 other weather-related events caused a record $104.8 billion in damage nationwide. This year, you can expect more of the same, if not worse. Parts of Florida may already be seeing property values fall. At the other extreme, Arizona, Nevada, and Utah rank among the highest terms of new housing developments in high fire risk zones per capita.

Accounting for this property risk factor requires high-quality data sources that enable investors and firms to factor current and evolving wildfire, flooding, and other weather- and climate-related risks into their investment models.

In fact, their bottom lines may depend on it—in 2022 and beyond.


To learn more about how property condition intelligence can help you navigate these and a growing number of other property risk factors, request a demo at