Is investing in residential real estate still a good bet? If so, how?

Part I — Is The Market Stable?

No one wants to buy a lemon.
Many of us still carry the scars of the 2008 meltdown, which was a loose banking law crisis, along with a morally corrupt rating system ring. Banks started offering loans that did not verify income and/or assets, which prove a borrower’s ability to repay, and required little or no down payment. Anyone with a pulse and ID could get a loan. This drove-up values and created a very unstable market hidden beneath “A” paper ratings. After the last housing bust, to protect against this from every happening again, the Ability-to-Repay/Qualified Mortgage rule made it unlawful to fund a mortgage without first making a “reasonable, good-faith determination” of a consumer’s ability to repay. The bottom line: this meant documentation, verification, and a standardized set of underwriting factors. In practice, ATR/QM removed the oxygen that fed 2006–07 exotic lending referred to as sub-prime, which is one reason broad delinquencies remain low by long-run standards even after the rate shock. (For a plain-English statutory summary see the CFPB’s original rule brief.)
IN the short-term, this caused the market, and therefore valuations to slow way down. No longer would someone’s word, even a CPAs, be enough. Since 2010, you have to verify how the mortgage will be paid, whether through income, assets, or a rent-roll available on residential investment property. The loser the income qualification, the larger the down payment required, which no one walks away from so willy-nilly as in the mid-2000s.
IN recent years, we’ve seen the reintroduction of more ‘creative’ products, like the DSCR, but they follow this essential rule—proof of the ability to repay often accompanied with a larger downpayment. This in turn makes the market more stable by a long shot than 2008.

New Tax Benefits with OBBA

In July 2025, Congress enacted the One Big Beautiful Bill Act (H.R. 1). Among its business provisions, Section 70301 makes permanent 100% bonus depreciation under IRC §168(k) and sets effective dates tied to acquisition on or after Jan. 19, 2025 (with a one-time election allowing reduced percentages for assets placed in service in the first taxable year ending after that date). Congress.gov
This does mean you will need to have a cost segregation completed—which needs to be completed by a profession. In the proceed, components that typically get depreciated in 20 years or as few as five, such as appliances, dedicated electrical, certain cabinets/finishes can be deducted in the first year, and site/land improvements like fencing or paving from the 27.5-year depreciation can be moved to the 5-, 7-, or 15-year classes. The IRS’s Cost Segregation ATG sets the classification logic and defines “residential rental property” (27.5-year GDS; 80% of gross rental income from dwelling units). Day-to-day rental rules (depreciation, passive loss limits, recordkeeping) are in Publication 527, for your reference.

What does this mean in practical terms? If you can offset a tax bill or at least what you owe on your Schedule E income this year. You don’t have to wait.
Just a note as not to be confused with commercial property:

• QIP, “Qualified improvement property,” are not residential by statute; residential interior work does not become QIP just because it’s “interior.” Acceleration in rentals comes only from bona fide residential property and land improvements identified in a cost segregation for residential property.
Practical upshot: 2025 is unusually friendly to front-loading depreciation on rentals—if the fundamentals pencil first. Cost seg amplifies a good deal; it won’t rescue a bad one. So, read on about markets and what to look for if the tax break sounds appealing. (For a current, plain-English policy read, see Tax Foundation’s September analysis.) Tax Foundation