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17 U.S. Markets With the Best Predicted Single Family Rental Returns for 2016

17 U.S. Markets With the Best Predicted Single Family Rental Returns for 2016

2 min read
Allison Leung

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In a just released study on single family rental data for Q1 2016, RealtyTrac analyzed single family rentals across 448 counties in the U.S. with populations of 100,000 or more and ranked the counties based on the potential annual gross rental yield. This was calculated by dividing the annualized monthly rent by the median home price.

Said Daren Blomquist, senior VP of RealtyTrac, “Rapidly rising home prices and tepid wage growth have dampened single family rental investment returns and growth potential in many markets, but there are still plenty of solid opportunities available for real estate investors willing to cast a wider geographic net.”

The study found that rents are rising faster than median home prices in 45 percent of the studied markets, showing strong demand for rentals in those markets. Additionally, annual wage growth outpaced rent growth in 43 percent of markets, indicating room for rising rental returns.

Screen Shot 2016-04-01 at 2.21.27 PM
via: RealtyTrac; for interactive map, click here.

5 Counties With the Highest Annual Gross Rental Yields

Of the counties studied, the average annual gross rental yield was 9.4 percent. The counties with the highest yields were:

  1. Baltimore City, Maryland (28.5 percent)
  2. Clayton County, Georgia — Atlanta metro area (25.8 percent)
  3. Wayne County, Michigan — Detroit metro area (24.2 percent)
  4. Bay County, Michigan — the Bay City metro area (21.2 percent)
  5. Macon County, Georgia (20.6 percent)

Related: How to Choose the Best Markets for Real Estate Investing

8 Counties With the Lowest Annual Gross Rental Yields

Conversely, counties with the lowest annual gross rental yields included:

  1. Arlington County, Virginia — Washington, D.C., metro area (3.3 percent)
  2. California Bay area counties of San Francisco (3.4 percent)
  3. San Mateo (3.6 percent)
  4. Marin (3.9 percent)
  5. Santa Cruz (4.0 percent)
  6. Santa Clara (4.0 percent)
  7. Williamson County — Nashville metro area (4.0 percent)
  8. Kings County (Brooklyn), New York (4.0 percent)

17 Markets Predicted to Have the Best Future Growth in 2016

Seventeen markets were marked by the study as the best areas for future growth in single family rental returns; these places saw average weekly wages grow by at least 5 percent, outpacing annual rental rate growth.

The counties were as follows:

Screen Shot 2016-04-01 at 2.40.58 PM
via: RealtyTrac; for interactive chart, click here.

Best & Worst Single Family Rental Returns by Zip Code

The study also looked at 6,551 zip codes across the country with populations of 2,500 or more. Of these, it found the top zip codes for rental returns in 2016 to be 48505 in the Flint, Michigan metro area (150.2 percent); 21223 in the Baltimore, Maryland metro area (102.0 percent); 35208 in the Birmingham, Alabama metro area (89.7 percent); 21205 in the Baltimore, Maryland metro area (87.8 percent); and 48205 in the Detroit, Michigan metro area (87.1 percent).

Related: 3 Factors to Study in Your Market BEFORE Buying an Investment Property

Meanwhile, those with the lowest potential returns for 2016 were found in 34102 in the Naples, Florida metro area (0.5 percent); 33480 in the Miami, Florida metro area (0.6 percent); followed by three zip codes in the Los Angeles metro area: 90210 (0.9 percent), 90069 (1.0 percent), and 90402 (1.1 percent).

Screen Shot 2016-04-01 at 2.46.29 PM
via: RealtyTrac; for interactive map, click here.

Investors: What are you seeing as far as single family rental returns in your market? Which of these predictions do you think will be accurate (and which ones not so much)?

Let me know what you think with a comment.