IRVINE, CA—(Marketwired – Jan 29, 2015) – RealtyTrac® (www.realtytrac.com), the nation's leading source for comprehensive housing data, today released its Q1 2015 Residential Property Rental Report, which ranks the best markets for buying residential rental properties in the first quarter of 2015.
The report also looks at which markets are seeing the biggest increases in rental rates in 2015 compared to 2014, and provides rankings of the best safe haven residential rental markets, along with the best markets for renting to Millennials, best markets for renting to Generation Xers, and best markets for renting to Baby Boomers.
“With homeownership rates at their lowest level in 20 years, historically low levels of housing starts and relatively low home prices in many parts of the country, there is still plenty of opportunity in the U.S. housing market for single family rental investors employing a variety of investing strategies,” said Daren Blomquist, vice president at RealtyTrac. “Whether focusing on markets where homeownership–shy Millennials are migrating, markets where recovering Gen X homeowners–turned–renters are prevalent, or markets Baby Boomers are testing for retirement, investors can find good options with solid potential rental returns.
“There are certainly markets where buying single family rentals no longer makes sense because of rapidly rising prices over the past few years,” Blomquist added. “Savvy single family rental investors will tread cautiously in such markets despite the siren song of strong home price appreciation.”
“Buying single family homes as rental properties in Southern California is reserved for those that have a very specific investment strategy,” said Chris Pollinger, senior vice president of sales with First Team Real Estate, covering the Southern California market, where annual gross yields on rentals range from less than 5 percent in Orange County to nearly 9 percent in the inland San Bernardino County.
For the report, RealtyTrac analyzed median sales prices for single family homes and condos and average fair market rents for three bedroom properties, along with unemployment rates and demographic trends in 516 U.S. counties with a combined population of 236 million people — 76 percent of the total U.S. population. (See full methodology below.)
The 516–county analysis found an average potential return on residential rental properties of 9.04 percent in the first quarter of 2015, down slightly from an average potential annual return of 9.06 percent for residential rentals purchased in the third quarter of 2014 — the most recent residential rental property report issued by RealtyTrac.
Best markets for buying residential rentals in Georgia, Maryland, Virginia and Michigan
Markets with the highest potential rental returns were Clayton County, Ga., in the Atlanta metro area (25.83 percent), Bibb County, Ga., in the Macon metro area (22.33 percent), Baltimore City, Md., (20.99 percent), Richmond City, Va., (20.42 percent), and Wayne County, Mich., in the Detroit metro area (19.34 percent).
Top 20 Markets for Residential Rental Returns
County Name
Metro Area
2015 3
Bedroom
Fair Market
Rent
November
2014
Median
Home Price
Annual
Cash Flow for
Cash Investor
(after tax and
insurance)
Annual
Gross
Yield
Clayton
Atlanta–Sandy Springs–Marietta, GA
$1,213
$56,344
$13,773
25.83%
Bibb
Macon, GA
$960
$51,600
$10,803
22.33%
Baltimore City
Baltimore–Towson, MD
$1,574
$90,000
$17,637
20.99%
Richmond City
Richmond, VA
$1,306
$76,750
$14,605
20.42%
Wayne
Detroit–Warren–Livonia, MI
$1,128
$70,000
$12,563
19.34%
Philadelphia
Philadelphia–Camden–Wilmington, PA–NJ–DE–MD
$1,440
$92,000
$16,001
18.78%
Pasco
Tampa–St. Petersburg–Clearwater, FL
$1,280
$86,000
$14,165
17.86%
Hernando
Tampa–St. Petersburg–Clearwater, FL
$1,280
$86,000
$14,165
17.86%
Oswego
Syracuse, NY
$1,039
$70,000
$11,495
17.81%
Wyandotte
Kansas City, MO–KS
$1,221
$83,250
$13,495
17.60%
Richmond
Augusta–Richmond County, GA–SC
$990
$70,000
$10,907
16.97%
Marion
Ocala, FL
$1,055
$75,000
$11,618
16.88%
Madison
Anderson, IN
$930
$68,000
$10,215
16.41%
Monroe
East Stroudsburg, PA
$1,322
$100,000
$14,474
15.86%
Mobile
Mobile, AL
$1,036
$78,550
$11,340
15.83%
Trumbull
Youngstown–Warren–Boardman, OH–PA
$866
$66,950
$9,461
15.52%
Muskegon
Muskegon–Norton Shores, MI
$961
$75,200
$10,487
15.34%
Niagara
Buffalo–Niagara Falls, NY
$982
$77,000
$10,714
15.30%
Citrus
Homosassa Springs, FL
$1,020
$80,000
$11,128
15.30%
Winnebago
Rockford, IL
$1,011
$80,000
$11,020
15.17%
Best markets for renting to Millennials
Among the 516 counties analyzed there were 50 where the millennial share of the population was above the national average of 22 percent, where the millennial population increased at least 5 percent between 2007 and 2013, and where potential annual rental returns on residential properties were 9 percent or higher.
“With the aggressive growth of companies like Amazon, and the arrival of several Silicon Valley newcomers like Facebook, Twitter, Google, and Apple, Seattle is becoming an increasingly popular spot for Millennials,” said OB Jacobi, president of Windermere Real Estate, covering the Seattle market, where Pierce County ranked as one of the top 50 markets for renting to Millennials and King County saw a 34 percent jump in Millennials between 2007 and 2013 — the 13th biggest increase of the 516 counties analyzed in the report. “Not only do many of these Millennials have stable employment, but strong job prospects going forward, and a rosy forecast for future salary growth. All of this has turned Seattle into a sweet spot for those looking to buy rental properties. Vacancies are low, rents are on the rise, and growth in Seattle's tech sector is providing a built–in clientele for investors with no signs of slowing.”
Millennial magnet markets with the highest annual rental returns were Baltimore City, Md., (20.99 percent annual gross yield), Richmond City, Va., (20.42 percent), Philadelphia County, Pa., (18.78 percent), Wyandotte County, Kan., in the Kansas City metro area (17.60 percent), and Richmond County, Ga., in the Augusta–Richmond County metro area (16.97 percent).
Top 10 Millennial–Heavy Markets for Rental Returns
County Name
Metro Area
2015 3
Bedroom
Fair Market
Rent
November
2014
Median
Home Price
Annual Cash Flow for Cash Investor (after tax and insurance)
Annual Gross
Yield
%
Millennials
of Total in 2013
% Change in Millennials from 2007
to 2013
Baltimore City
Baltimore–Towson, MD
$1,574
$90,000
$17,637
20.99%
27.30%
11.28%
Richmond City
Richmond, VA
$1,306
$76,750
$14,605
20.42%
30.89%
31.62%
Philadelphia
Philadelphia–Camden–Wilmington, PA–NJ–DE–MD
$1,440
$92,000
$16,001
18.78%
27.21%
24.90%
Wyandotte
Kansas City, MO–KS
$1,221
$83,250
$13,495
17.60%
23.13%
8.47%
Richmond
Augusta–Richmond County, GA–SC
$990
$70,000
$10,907
16.97%
25.31%
6.91%
Yuma
Yuma, AZ
$1,258
$109,950
$13,568
13.73%
22.11%
8.76%
Jackson
Kansas City, MO–KS
$1,221
$109,450
$13,131
13.39%
22.87%
14.20%
Cumberland
Fayetteville, NC
$1,035
$94,000
$11,113
13.21%
27.11%
20.77%
Duval
Jacksonville, FL
$1,228
$112,000
$13,179
13.16%
24.19%
19.18%
Sumter
Sumter, SC
$812
$77,000
$8,674
12.65%
22.38%
9.24%
Best markets for renting to Gen Xers
There were 20 counties among those analyzed where the Generation X share of the population was above the national average of 16 percent, where the Generation X population increased at least 5 percent between 2007 and 2013, and where potential annual rental returns on residential properties were 9 percent or higher.
“Ohio housing is affordable, attracting many different income and age demographics to the state,” said Michael Mahon, executive vice president at HER Realtors, covering the Ohio housing markets of Cincinnati, Dayton and Columbus, where Franklin County ranked among the 50 best for renting to Millennials, and Licking County ranked among the 20 best for renting to Gen Xers as well as among the 40 best for renting to Baby Boomers. “The stability of prices within the Ohio markets over recent years has contributed to an increasing demand for housing along with job and population growth throughout many of Ohio's local markets. With many developers still in recovery from our nation's economic crisis, new construction projects have been underwhelming in meeting Ohio's housing demand. As demand continues to increase and supply continues at conservative levels, anticipation for 2015 is for continued increases in rental returns throughout the state.”
Generation X–heavy markets with the highest annual rental returns were counties in the Atlanta, Chicago, Jacksonville, Fla., Little Rock, Ark., and Orlando metro areas.
Top 10 Generation X–Heavy Markets for Rental Returns
County Name
Metro Area
2015 3
Bedroom
Fair Market
Rent
November
2014
Median
Home Price
Annual Cash
Flow for Cash
Investor (after
tax and insurance)
Annual
Gross
Yield
%
Generation
Xers of
Total in
2013
% Change
in Generation
Xers from
2007 to 2013
Douglas
Atlanta–Sandy Springs–Marietta, GA
$1,213
$100,000
$13,166
14.56%
18.86%
10.28%
Kendall
Chicago–Naperville–Joliet, IL–IN–WI
$1,726
$163,000
$18,446
12.71%
19.49%
25.41%
Henry
Atlanta–Sandy Springs–Marietta, GA
$1,213
$118,000
$12,916
12.34%
19.05%
8.57%
Clay
Jacksonville, FL
$1,228
$124,000
$13,012
11.88%
16.78%
5.14%
Paulding
Atlanta–Sandy Springs–Marietta, GA
$1,213
$126,750
$12,794
11.48%
19.85%
7.55%
Saline
Little Rock–North Little Rock–Conway, AR
$1,040
$108,950
$10,966
11.45%
16.14%
11.49%
Osceola
Orlando–Kissimmee, FL
$1,330
$140,000
$14,014
11.40%
16.95%
8.35%
Johnston
Raleigh–Cary, NC
$1,189
$127,750
$12,492
11.17%
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