The “20 Best Markets to Buy Single Family Rentals” Released by RealtyTrac


What’s your market like?

If you are located in one of the hot areas around the country, you might be wondering where all the good deals have gone to. Are the hedge funds really buying up everything and causing prices to skyrocket to unmanageable levels everywhere? Not according to a new study released today by RealtyTrac that looks at the top 20 markets to buy single family homes in today, based on cap rates and cashflow. In fact, there are some areas where significant cashflow is still achievable.

In a statement released by RealtyTrac, VP Daren Blomquist discussed the problem and what they’ve found:

“Buying single family homes as rentals that actually generate good monthly cash flow has become more difficult over the past year as institutional investors crowded into the market, snapping up tens of thousands of properties in 2012 alone,” said Daren Blomquist vice president at RealtyTrac. “But there are still opportunities for the more conservative, individual investor to buy rental homes that generate a healthy return on investment — it often just takes persistence and willingness to pass on bad deals. The top 20 markets we selected represent the best chance to buy rental homes that generate good cash flow, but opportunities are available in most markets across the country given the combination of relatively low prices, low interest rates and a strong rental market.”

The 20 Best Markets for Single Family Homes

According to their findings, Memphis, TN leads the pack with a “cash-purchase cap rate” averaging 10.38%, followed closely by Saginaw, MI and Toledo, OH. The following charts offer more details into the study:




For more information on the study by RealtyTrac, click here.

How does your city stack up? What do you think about the findings in this report? Share your thoughts below!

About Author

Brandon Turner

Brandon Turner (G+ | Twitter) spends a lot of time on Like... seriously... a lot. Oh, and he is also an active real estate investor, entrepreneur, traveler, third-person speaker, husband, and author of "The Book on Investing in Real Estate with No (and Low) Money Down", and "The Book on Rental Property Investing" which you should probably read if you want to do more deals.


  1. Awesome find Brandon.

    The problem I find is that every time I’ve ran an analysis on a property provided by a turnkey provider in Memphis, never holds up to being even close to the 2% and 50% rules.
    Any thoughts on this for us out of state investors?

    • Brandon Turner

      Hey Mehran, thanks.

      Yeah, I’m fairly sure the 2% rule and the 50% rule are going to be almost impossible to find in any turnkey company. Turnkeys are nice because they are convenient, but that doesn’t make them cheap. However, if you live in an area where investing doesn’t make much sense, you might not have a better option!

      Hope that helps some!

        • Mehran Kamari on

          I agree, 50% has become a rule of mine because I have chosen it as one of my buying criteria. I think it’s wise to learn from those who have come before me.
          The dwarf that sits on the shoulder of a giant can see farther than the giant!

          I have recently found some turnkey providers that provide homes that meet my buying critiera as well 🙂

  2. I don’t care what Realty Trac says, Atlanta is not looking as a hot rental market right now and certainly not in the future. All those big shot investors have bought thousands of rental houses here helping only to saturate the rental market, if not right now it’s just a matter of time…

  3. I’ve never understood the whole 2%, 50% rule. Just because someone in one part of a cycle comes up with a formula that works for them it seems to have become somehow gospel.
    In Memphis you can buy plenty of homes on paper that would fit the rule but you wouldn’t want to own them. The A and B grade areas deliver far better results in the long term. And if you add in financing costs then the net returns can be very low and still make sense.
    For example we recently secured a $300,000 property rented for $2000 a month. A complete failure on the 2% and 50% rules but as the seller was carrying the note at 1.7% interest it is positive cash flow and out performing any $50,000, $1000 a month property you could find!

  4. I think their list is greatly lacking on some very important data. Unemployment, current vacancy rates, housing affordability, available inventory, future job market, population growth, taxes, business regulations etc etc etc.


  5. I remember the first time I purchased two smoking deals out of state, (using my California brain) a 44 & 66 unit apartment building in Phonics Arizona-REO’S purchased directly from Great Western Bank-( a place I once worked as an appraiser & knew EVERYONE) The properties 100% occupied, even came with estoppel certificates (rent prof up) Then I closed escrow- All rented alright- but nobody paying rent…It’s tough to fit everything into a soundbite type article-You guys are correct. Attempting to make real life decisions that come with commitment & ramifications about the viability of investment properties, by using generalities is well…, not wise. Choosing investment properties is like choosing a partner or mate, it’s ALL about specifics! Everything else is just conversation. Thank you for the opportunity to participate.

  6. Mehran,

    The 2%/50 rule works great in the Pittsburgh market. However, there’s usually about $5k of rehab to perform in the deal as opposed to being completely turn key. I guess sellers leave some work on the table but I’ve seen many rentals that meet the parameters.

  7. Mike McKinzie on

    Great Article. The location of the last house I bought? Memphis, TN and NOT a Turnkey Property, a HUD Foreclosure, In for $56,000, $7,500 in refurbishing and rented for $900 a month. Paid ALL CASH, and using the 50% RULE/GUIDELINE, making 8.5% Cash on Cash. Luckily, the 50% rule won’t really kick in the first few years as I made some improvements at the purchase, so my real return the first few years will be over 10% which I enjoy and can sleep well at night. As a side note, it is the OLDEST house I have bought in 10 years, having been built in 1998.

    • I don’t mean this as a critique, it’s a legitimate question to see if I am the only thinking like this…

      8.5% return?

      You can get that fairly easily in the stock market with a fraction of the risk and hassle factor that comes with landlording and owning a property.

      Am I the only one that thinks this?

      • Brandon Turner

        Hey Luis, Good thought – but I’d imagine, though, that “cash on cash” return is similar to dividends, where 8.5% would be awesome. The total return from appreciation, loan paydown, and tax benefits are going to be much higher than the stock, hopefully. That’s my thought anyways.

        • I agree with what you say that the it has the “potential” to be higher than 8.5% but that means it also has the “potential” to be less than 8.5%…

          I have trained myself to only consider a rental for what it can give you right now since appreciation cannot be quantified accurately.

          IMHO I would not look at a rental that produces any less than 15%, 20% is my goal. Like I said, if I am putting up with the hassle of landlording I want much better return than what I can get in the stock market.

  8. Erion Shehaj on

    Only Realty Trac would have the brass to publish a list for “conservative” investment opportunities that is dominated by the likes of Florida, Las Vegas and rust belt markets.

    What’s that saying: Those who don’t learn from history…

  9. I saw these charts from a post in the forums and I looked through them quite a bit. Being that I work nearly 100% of my time in the rental properties arena, I disagree with a lot of what is in these charts. Jason is right that they leave out some critical data. That data, being vacancies and whatnot, is critical to knowing whether the published cap rates will stand or not. Tenant quality is key, location is key, growth is key. Detroit isn’t growing, it’s shrinking, but that’s not shown on the list. Vegas has so many vacancies that you’re lucky to get your place rented, but that’s not on the list. Plus, one chart mentions a “financed cap rate”… there’s not even such thing as a “financed cap rate”, so the fact they use it makes me leery about credibility.

    With all that said, not to knock your charts because they are good references to get someone started and to be able to start looking into and comparing different markets. Everyone just needs to understand that there is more to it than what these charts show. Cap rates mean nothing without the rest of the factors.

    But, the charts do work out well for @chrisclothier, which is awesome! 🙂 Love his company.

  10. In Vegas we are having many HOA rentals plus big companies fighting for the rental. Many tenants have eviction problems and felonies. It is really hard to get a good tenant in Las Vegas unless you rent to section 8.

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