The New Way to Invest in U.S. Real Estate
For many years, the Latin American or non-specialized investor looking to enter the U.S. market followed an almost natural path: buy an apartment, a house, or a small rental property. The logic was straightforward and compelling. The United States offered legal certainty, deep markets, a long record of real estate appreciation, and exposure to a hard currency. In that sense, real estate became a disciplined gateway into dollar-denominated wealth.
Since 2023, however, that equation has become less automatic. Not because real estate has ceased to be a valuable asset class, but because the cash-flow math has tightened. Mortgage rates moved higher, prices did not correct enough to restore affordability, insurance became more expensive, taxes and maintenance costs increased, and existing-home sales slowed to levels not seen in nearly three decades. In 2024, U.S. existing-home sales closed at roughly 4.06 million units, the lowest annual level since 1995, while the median price reached US$407,500. In 2025, sales remained broadly flat, while the median price rose to US$414,400. (Eye On Housing)
At the same time, and almost quietly, another market began to gain weight: private real estate debt. As banks became more cautious in financing construction, development, and commercial real estate, private credit funds started to step into the gap. The implication for investors is important: the opportunity may no longer lie only in owning the property, but also in financing those who build it.
The Size of the Market: This Is Not a Small Story
To understand the magnitude of the shift, it is useful to start with the size of the playing field. As of December 2025 (Table 1), U.S. commercial banks held approximately US$18.93 trillion in total bank credit and US$13.30 trillion in total loans and leases. Within that universe, real estate loans accounted for roughly US$5.75 trillion, of which US$2.68 trillion corresponded to residential loans and US$3.06 trillion to commercial real estate. Within commercial real estate lending, construction and land development loans stood at approximately US$454.5 billion. (Federal Reserve)
These figures make one point very clear: real estate remains a core pillar of the U.S. financial system. Yet precisely because of that size, banks cannot lend to the sector without limits. U.S. banking regulation requires close monitoring when construction, land, and development lending exceeds certain thresholds relative to regulatory capital, and also when total commercial real estate exposure becomes elevated in relation to a bank’s capital base. (Federal Reserve)
Table 1. U.S. Real Estate Bank Lending by Destination, 2025
| Relevant Indicator | Approximate Value |
| Total bank credit in the United States | US$18.93 trillion |
| Total bank loans and leases | US$13.30 trillion |
| Bank real estate loans | US$5.75 trillion |
| Residential real estate loans | US$2.68 trillion |
| Bank commercial real estate loans | US$3.06 trillion |
| Construction & land development loans | US$454.5 billion |
| Multifamily loans held by banks | US$627.3 billion |
This is where private debt enters the picture. The global private credit market has surpassed US$2.1 trillion in assets and committed capital, with roughly three quarters concentrated in the United States. Market estimates cited by S&P Global also suggest that private credit could expand from around US$2.28 trillion in 2025 to approximately US$4.50 trillion by 2030. (IMF)
Of course, not all private credit finances real estate construction. Even so, the direction of travel is clear: when banks reduce exposure, private credit moves in to fill part of the space. In commercial real estate, the outstanding stock of commercial mortgage debt was approaching US$4.9 trillion in the second quarter of 2025, while commercial originations were estimated at roughly US$634 billion in 2025, with projections close to US$805 billion for 2026. (Principal Asset Management)
Direct Real Estate: The Asset Is Still Solid, but the Cash Flow Has Become More Demanding
Direct real estate has not lost its fundamental appeal. It remains a tangible, dollar-denominated, financeable asset supported by a structural need for housing. In fact, several estimates continue to point to a significant housing shortage in the United States, measured in several million units. That supply gap continues to support the long-term investment case for residential property. (Principal Asset Management)
The challenge, however, lies in current income. In 2024, ATTOM estimated that the gross annual rental yield for three-bedroom single-family homes was 7.55%; in 2025, that yield slipped slightly to 7.45%. At first glance, those numbers look attractive. But they are gross yields: they do not deduct mortgage payments, insurance, property taxes, maintenance, management, vacancy, repairs, or transaction costs.(ATTOM)
The strongest pressure has come from financing. Mortgage rates remained for much of 2024 and 2025 in the 6%–7% range, far above the cost of money that powered the 2020–2021 boom. Even in April 2026, Freddie Mac reported an average rate of 6.23% for the 30-year fixed-rate mortgage, still high compared with the previous era of cheap money. (Freddie Mac)
A simple example illustrates the shift. Taking the 2025 median existing-home price of US$414,400 and applying a gross rental yield of 7.45%, annual gross rental income would be approximately US$30,900. But if the investor finances 70% of the purchase — about US$290,000 — with a 30-year mortgage near 6.5%, annual debt service would be around US$22,000. In other words, before taxes, insurance, maintenance, and vacancy, a very large share of gross income has already been absorbed. This is an illustrative calculation based on reported median prices, mortgage rates, and gross rental yields in the U.S. market. (AP News)
Then comes a second layer of pressure: operating costs. The U.S. Department of the Treasury reported that homeowners insurance premiums rose 8.7% above inflation between 2018 and 2022, and that average premiums in high-risk areas were 82% higher than in lower-risk areas. The U.S. Census Bureau also noted that more than 5.3 million households paid over US$4,000 per year in property insurance in 2023. (U.S. Department of the Treasury)
This is why, although real estate still makes sense as a wealth-preservation asset, the investment is no longer a simple “buy and wait” story. In the 2024–2025 cycle, an investor who bought at a high price, used expensive mortgage debt, and faced rising operating costs may have ended up with a property that preserves value but produces limited net cash flow. In many cities, net returns after expenses can compress toward the 3%–5% range — and even lower when vacancy, major repairs, or high insurance costs appear. This is not an official national average, but a reasonable estimate derived from comparing observed gross rental yields with prevailing financing and operating-cost pressures. (ATTOM)
Private Real Estate Debt: Financing the Bottleneck
While individual investors were dealing with tighter margins in direct property ownership, developers were facing a different problem: access to financing. Banks did not disappear from the market, but they became more selective. The Federal Reserve’s Senior Loan Officer Opinion Survey showed that, in 2025, standards for commercial real estate lending remained restrictive, including construction and land development loans, even though conditions showed some signs of stabilization toward year-end. (Federal Reserve)
The logic is easy to understand. Banks were monitoring three risks at the same time. First, high interest rates made repayment more expensive. Second, values in several commercial real estate segments had adjusted. Third, regulatory and capital requirements forced banks to manage real estate concentration more carefully. In that environment, many viable projects were not necessarily short of demand; they were short of bank credit, or at least short of credit on the terms they needed. (Federal Reserve)
This is where private debt funds become relevant. Their role is not to buy the property, but to lend against it. A fund may finance land acquisition, construction, project completion, bridge refinancing, or recapitalization. In exchange, it requires an interest rate, collateral, covenants, payment priority, and, in many cases, a more conservative loan-to-cost or loan-to-value structure than traditional bank financing.
In 2025, market conditions supported this thesis. According to Principal Asset Management, commercial real estate originations increased 47% during the first three quarters of 2025, while outstanding commercial mortgage debt approached US$4.9 trillion. In addition, the Mortgage Bankers Association projected that commercial originations would rise from roughly US$633.7 billion in 2025 to US$805.5 billion in 2026, with multifamily increasing from US$330.6 billion to US$399.2 billion. (Principal Asset Management)
From a rate perspective, private real estate debt became more compelling because loans are originated over an elevated base rate plus a spread. In the fourth quarter of 2025, Altus Group reported Term SOFR at 3.99%, senior low-leverage spreads near 253 basis points over SOFR, and all-in construction lending rates around 6.30%, down from 6.65% a year earlier.(Altus Group)
For investors, this means that a well-structured fund may capture more predictable current income than direct property ownership. Principal Asset Management reported that open-ended CRE debt funds generated a 6.2% net annualized return since 2014, while North American private credit delivered an 8.7% annualized return over the same period, according to Preqin data cited by the firm. (Principal Asset Management)
The essential difference is this: in direct real estate, the investor wins if net rent and appreciation offset costs, debt service, and illiquidity. In private debt, the investor wins if the borrower pays and the collateral protects capital in the event of default. In practical terms, the investor is exchanging operating risk for credit risk.
Investment Comparison: Owning the Asset or Financing It
| Variable | Direct Real Estate | Private Real Estate Debt Fund |
| Capital invested | Purchase of a property, usually with equity plus mortgage debt | Participation in a fund that lends to projects |
| Market scale | Bank real estate loans: US$5.75 trillion; residential loans: US$2.68 trillion | Global private credit: over US$2.1 trillion; commercial mortgage debt: nearly US$4.9 trillion |
| Expected return | Net rent plus appreciation | Interest, fees, and principal repayment |
| Observed gross return | Gross rental yield: 7.55% in 2024 and 7.45% in 2025 | Open-ended CRE debt funds: 6.2% net annualized since 2014; North American private credit: 8.7% annualized |
| Main risk | Vacancy, costs, insurance, property taxes, repairs, and mortgage rates | Sponsor default, construction delays, refinancing risk, and collateral quality |
| Liquidity | Low; depends on selling the property | Low to medium; depends on redemption windows or fund term |
| Control | High, but requires active management | Low; depends on the manager |
| Ideal profile | Investor with local knowledge and operational capacity | Investor seeking financial income and diversification |
The first strength of direct real estate is both psychological and patrimonial: investors understand what they own. They can visit the property, improve it, rent it, sell it, or hold it. In addition, in an economy with a housing shortage, the asset is supported by real demand. Yet that same investment requires management. A property does not pay for itself: it has to be leased, maintained, insured, repaired, and, at times, carried through months without a tenant.
Private debt, by contrast, does not offer the emotional satisfaction of ownership, but it can offer a cleaner financial logic. The investor does not depend on rents rising every year; rather, the outcome depends on whether the credit was well originated. If the loan is senior, backed by real collateral, supported by meaningful developer equity, and not exposed to highly speculative projects, the risk may be more contained than in the direct purchase of a single property.
Still, it would be a mistake to present private debt as risk-free. The International Monetary Fund has warned that the rapid growth of private credit deserves close monitoring because of lower transparency, less frequent valuations, interconnections with banks and insurers, and potential liquidity pressures in adverse scenarios. (IMF)
That is why the right comparison is not “real estate is good” and “private debt is bad,” or the reverse. The real comparison is between two ways of taking real estate exposure: one based on ownership and direct management; the other based on credit, collateral, and manager selection.
What Can Be Done in 2026–2030
The first opportunity lies in the housing shortage. As long as the United States maintains a structural deficit of housing units, there will be demand for new construction, particularly in multifamily, workforce housing, build-to-rent, and housing in population-growth markets. This does not mean that every project will succeed. It does mean, however, that the economic need for new supply remains real. (Principal Asset Management)
The second opportunity lies in debt maturities. Principal Asset Management noted that approximately US$2.1 trillion in CRE loans are scheduled to mature over the next three years. That maturity wall can create room for private debt funds to refinance viable assets, provide bridge capital, or restructure projects with good locations but weak capital structures. (Principal Asset Management)
The third opportunity is the gradual normalization of credit markets. If rates decline slowly, developers may improve their refinancing and exit capacity, while funds may still capture attractive spreads. If rates fall too quickly, however, new loans may offer lower coupons. For that reason, the best environment for private debt is not necessarily a sharp collapse in rates, but a setting of moderately high rates, contained inflation, and selectively recovering real estate activity.
Finally, there is a practical opportunity for the non-specialized investor: gaining access to real estate exposure without operating a property. A well-managed debt fund can diversify across projects, sponsors, geographies, and maturities. That level of diversification is difficult to replicate for an investor who buys a single house or apartment.
What Needs to Be Monitored in 2026–2030
The most visible threat for direct real estate is that costs continue to rise faster than income. Insurance, property taxes, maintenance, and vacancy can consume a large portion of rent. In states such as Florida, Texas, or California, where climate risk and insurance costs are especially relevant, the gap between gross return and net return can be particularly wide. (U.S. Department of the Treasury)
The second threat is that mortgage rates remain elevated. If the 30-year mortgage stays close to the 6%–7% range, affordability will remain constrained, transaction volume may stay weak, and the exit path for new projects may be more difficult. That situation can affect both the property buyer and the fund that finances construction. (Freddie Mac)
For private debt, the main threat is poor origination. When too much capital chases the same opportunities, spreads compress, covenants weaken, and funds may begin to accept risks that are not adequately compensated by the return offered. In construction, there are always risks related to cost overruns, delays, permitting, contractor failure, slower sales, or insufficient refinancing.
The final threat is illiquidity. Both the property and the fund can be difficult to exit in periods of stress. But there is an important difference: in direct real estate, the investor can see the asset; in a fund, the investor relies on reports, valuations, and the manager’s decisions. That lower level of transparency requires stricter due diligence before investing. (IMF)
Which Option May Be Better?
For the non-specialized investor, the question should no longer be simply: “Should I buy a property in the United States?” The more precise question is: “Do I want to manage a real estate asset directly, or would I rather capture the financial income created by the need to finance it?”
In the 2024–2025 cycle, direct real estate remained a relevant wealth-preservation investment, but it became less generous from a cash-flow perspective. Prices stayed high, sales were weak, mortgages remained expensive, and operating costs increased. Under those conditions, buying a property can still be a sound decision if the investor has access to a specific opportunity, understands the local market, can buy with modest leverage, and is willing to manage the asset.
For investors seeking dollar-denominated real estate exposure, current income, and lower operating burden, private real estate debt appears to be a more efficient alternative. Not because it is simpler, but because it captures a structural shift in the market: more selective banks, developers in need of capital, and a significant volume of real estate debt that will need to be refinanced between 2026 and 2030.
The recommendation, therefore, is clear but prudent: for the non-specialized investor, a senior, diversified private real estate debt fund — backed by real collateral, conservative loan-to-cost ratios, proven managers, and limited exposure to speculative projects — may be a better first option than buying a property directly. Direct ownership remains attractive for investors with time, local knowledge, and operational capacity. But in the new cycle, the more compelling return may not come from owning the brick, but from financing it with discipline.
References
• Altus Group. (2026). U.S. commercial real estate debt markets close 2025 on a stronger note. (Altus Group)
• Associated Press. (2026). 2025 home sales stuck at 30-year low with prices high and mortgages onerous. (AP News)
• ATTOM. (2024). Q1 2024 Single-Family Rental Market Report. (ATTOM)
• ATTOM. (2025). Top 10 counties for buying single-family rentals in 2025. (ATTOM)
• Federal Reserve Board. (2025). Assets and Liabilities of Commercial Banks in the United States — H.8. (Federal Reserve)
• Federal Reserve Board. (2025). Senior Loan Officer Opinion Survey on Bank Lending Practices — July 2025. (Federal Reserve)
• Federal Reserve Board. (2025). Senior Loan Officer Opinion Survey on Bank Lending Practices — October 2025. (Federal Reserve)
• Freddie Mac. (2026). Primary Mortgage Market Survey. (Freddie Mac)
• International Monetary Fund. (2024). Fast-growing $2 trillion private credit market warrants closer watch. (IMF)
• Mortgage Bankers Association. (2025). MBA CREF Forecast: Commercial and multifamily mortgage originations to increase in 2026. (MBA)
• National Association of Home Builders. (2025). Existing-home sales at nearly 30-year low despite December gains. (Eye On Housing)
• Principal Asset Management. (2026). Private real estate debt: A banner 2025, with more room to run. (Principal Asset Management)
• S&P Global Market Intelligence. (2025). Private credit giants forecast strong growth into 2030. (S&P Global)
• U.S. Census Bureau. (2025). Property insurance costs and housing affordability. (Census.gov)
• U.S. Department of the Treasury. (2025). Homeowners insurance costs rising, availability declining. (U.S. Department of the Treasury)
