Investor ban 2027: what does renovate-to-rent mean for appraisals?

What the law and Treasury's proposal actually say

Here is the short version, with quotes where the wording matters. Section 1001 of the 21st Century ROAD to Housing Act became law on July 11, 2026, as Public Law 119-101. In the words of Treasury's proposed rule, it "prohibits large institutional investors from purchasing single-family homes, subject to certain exceptions." The ban starts January 7, 2027.

The Congressional Research Service sums up who is covered: "for-profit entities with investment control of at least 350 single-family homes in the aggregate." The homes covered are one- or two-unit homes, not manufactured homes. The penalty is up to "the greater of $1 million or three times the purchase price of the property." CRS also notes the section is set to be repealed on January 7, 2042.

On October 23, 2026, Treasury published its proposed rule (31 CFR Part 36, docket TREAS-DO-2026-0529). Proposed means not final. The details can change, and comments are due November 23, 2026, through regulations.gov.

Now the threshold math. A borrower flipping three houses a year is not close to 350. If you and every company tied to you control fewer than 350 single-family homes, the definition does not reach you by its terms. How to count, and who counts as tied to you, fills many pages of the proposal. That is a question for your own attorney, not your appraiser. This post is general information about valuation and records, not legal advice.

How the renovate-to-rent exception works

The law still lets a large investor buy a house it will fix and rent. Treasury's proposed section 36.6 sets the test:

• Bad shape on day one. The home must "not meet structural or core system elements of local building codes at the time of purchase." Treasury says a home cannot qualify because it fell apart after the sale.
• Real rehab. The investor must substantially rehabilitate the home, including resolving all material deficiencies. Work that "merely improves marketability or increases rental value" does not count as that rehab.
• The 15% bar. Improvements must total "not less than 15 percent of the purchase price of the single-family home."
• A 10% safe harbor. Spending at least 10% of that price on structural or core systems, while fixing all material deficiencies in them, is treated as substantial rehab. The 15% total still applies.

Treasury did not propose a deadline to finish the work or a required certifier. It asks whether the final rule should set a time limit, such as six months, and whether contractors, engineers or architects should certify the work. Contractors everywhere just got a little more popular.

The other exceptions cover build-to-rent homes (never owner occupied, bought within 18 months of the certificate of occupancy, first rented), homeownership programs, debts previously contracted, loss mitigation and servicing, and buying from another large institutional investor. I stick to renovate-to-rent here, because that is where condition and value records come in.

The 15% is measured on the purchase price, not the appraisal

This is the part that will trip people up. The 15% is not measured on the appraised value, the as-is value or the after repair value (ARV). Treasury's proposed "purchase price of the single-family home" is the price paid for the property minus "the tax-assessed value of the land at the time of the purchase." Count the house, not the dirt.

Here is a hypothetical. Say an investor pays $600,000 for a tired 1950s ranch in the Central Valley.

Same house, same price, a $16,500 difference in the bar. Why could the land number be that low? Under Proposition 13, California property is reassessed to market value only at a change in ownership or new construction, and yearly increases are generally limited to no more than 2%. A land figure on the roll can trail the market by years.

Treasury saw this coming. The proposal says assessed values in some places "may not be current, may be subject to assessment limitations." It asks whether the rule should use "another method, such as an appraisal," and what to do when the land value is "not current, under appeal, or otherwise unreliable." Which land figure a California purchase will use is still open.

Notice the ARV never shows up in that math. A big ARV does not lower the bar. Treasury's math does not take "but look at the comps" as a receipt.

What an appraisal can show, and what it cannot

An as-is appraisal made near the purchase records the house as the appraiser found it: interior and exterior photos, observed deficiencies, a condition rating, and the effective date the opinion speaks to. An as-completed appraisal, or a completion inspection after the work, records the finished house. Side by side, that is a dated before and after. My post on as-is vs. as-completed value explains the two.

That is useful, and it has limits. I am a California Certified Residential Appraiser, not a building inspector. A condition rating describes the house for valuation. It is not a finding that the home failed a building code, and my report does not decide whether a purchase fits the exception.

• Building department: permits, inspections and code notices.
• Contractor, engineer or architect: what is deficient, the scope, and what got fixed.
• Appraiser: value, observed condition and dated photos.
• Attorney: whether a purchase qualifies and how homes are counted.

Treasury lists records it expects, including "inspection reports, code violation notices, contractor assessments, engineer or architect reports, permit records" and "invoices, proof of payment." An appraisal is not on that list. The list says documentation "may include" those items, so it is not closed. Still, an appraisal should back up the code records, not replace them.

A documentation checklist for investors and lenders

Treasury is "not proposing specific documentation requirements," so nobody can promise what the final rule will ask for. Here is the file I would want if someone asked me to show what a house was and what changed.

Keep improvement costs apart from closing costs. Whether soft costs like permits, design and project management count toward the 15% is one of Treasury's open questions. And date every photo by room. A shoebox of receipts is technically a filing system the same way a junk drawer is technically a toolbox.

What I see in the field, plus notes for attorneys

On rehab files, the as-is photos are the ones nobody wants in the report and everybody wants later. The scorched panel, the stained subfloor, the water heater strapped in with optimism. Those pictures are the before. Without them, the after is just a nice house.

The other pattern is a scope that changes mid-project with no paper trail. If the crew finds rot behind the tile and fixes it, write it down that week, with photos and a change order. Memory is not a record, and neither is "the contractor said."

• An as-is appraisal is an opinion of value with condition observations as of an effective date. It is not a code compliance finding.
• Dates matter. The proposal ties the test to condition "at the time of purchase," so an inspection close to that date says more than one taken months later. A retrospective appraisal can value a past date, but it can only rely on records that exist from then.
• Ask the appraiser to keep the workfile and the original dated photos.
• It is a proposed rule. Read the final version before advising on any purchase.

My job on these files does not change: show the house as it was, show it as it is, and show the evidence in between. Facts over feelings, with timestamps.