Revealed: The Top 20 U.S. Markets With the Highest Rental Returns

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In a wide-ranging report released today, RealtyTrac takes a look at the state of rental markets across the country. Covering the hottest markets for renting to Millennials, Generation Xers and Baby Boomers, the study ranks the best markets for purchasing residential properties for buy and hold purposes in the first quarter of 2015. The study also relays findings on which markets have seen the biggest increases in rental rates from last year.

To find the nation’s best rental markets, RealtyTrac took into account median sales prices for single family homes and condos, along with average fair market rents for 3-bedroom properties. They analyzed 516 counties across the U.S.

Here’s what their data revealed.

The Top 20 Markets for Rental Returns

20. Rockford, IL (Winnebago Co.) — 15.17% Annual Gross Yield

19. Homosassa Springs, FL (Citrus Co.) — 15.30%

18. Buffalo-Niagara Falls, NY (Niagara Co.) — 15.30%

17. Muskegon-Norton Shores, MI (Muskegon Co.) — 15.34%

16. Youngstown-Warren-Boardman, OH-PA (Trumbull Co.) — 15.52%

15. Mobile, AL (Mobile Co.) — 15.83%

14. East Stroudsburg, PA (Monroe Co.) — 15.86%

13. Anderson, IN (Madison Co.) — 16.41%

12. Ocala, FL (Marion Co.) — 16.88%

11. Augusta-Richmond County, GA-SC — 16.97%

10. Kansas City, MO-KS (Wyandotte Co.) — 17.60%

9. Syracuse, NY (Oswego Co.) — 17.81%

8. Tampa-St. Petersburg-Clearwater, FL (Hernando Co.) — 17.86%

7. Tampa-St. Petersburg-Clearwater, FL (Pasco Co.) — 17.86%

6. Philadelphia-Camden-Wilmington, PA-NJ-DE-MD (Philadelphia Co.) — 18.78%

5. Detroit-Warren-Livonia, MI (Wayne Co.) — 19.34%

4. Richmond, VA (Richmond Co.) — 20.42%

3. Baltimore-Towson, MD (Baltimore Co.) — 20.99%

2. Macon, GA (Bibb Co.) — 22.33%

1. Atlanta-Sandy Springs-Marietta, GA (Clayton Co.) — 25.83%

Said RealtyTrac Vice President Daren Blomquist regarding the information, “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.”

Screen Shot 2015-01-29 at 4.33.32 PM

via: RealtyShares

 

 

 

 

 

 

 

 

 

The report also went into detail, analyzing which housing markets were best for renting to demographics of various age groups.

Related: 5.8 Million Homeowners No Longer Underwater – But Not All Markets Rebound

The 50 Best Markets for Renting to Millennials

The best markets to rent to Millennials, or those with a gross annual rental yield of at least 9 percent with a percentage of Millennials above the national average of 22 percent and where the population of this demographic increased at least 5 percent between 2007 and 2013, included Baltimore, MD; Richmond, VA; and Philadelphia County, PA.

Screen Shot 2015-01-29 at 4.33.49 PM

via: RealtyTrac

 

 

 

 

 

 

 

 

 

 

 

 

The 20 Best Markets for Renting to Gen Xers

The best Gen X markets were defined as those with a gross annual rental yield of at least 9 percent with a percentage of this demographic higher than the national average of 16 percent and where the Gen X population increased at least 5 percent between 2007 and 2013. The areas that best fit this criteria include counties in Atlanta, GA; Chicago, IL; Jacksonville, FL; Little Rock, AR; and Orlando metro areas.

via: RealtyTrac

via: RealtyTrac

 

 

 

 

 

 

 

 

 

 

 

 

The 40 Best Markets for Renting to Baby Boomers

Similarly, the highest ranking Baby Boomer markets were determined by those with a gross annual rental yield of 9 percent or higher with a share of Baby Boomers above the national average of 25 percent with at least a 5 percent increase in population between 2007 and 2013. The U.S. areas that won out in this category include counties in Tampa; Ocala, FL; East Stroudsburg, PA; Homosassa Springs, FL; and Binghamton, NY metro areas.

via: RealtyTrac

via: RealtyTrac

 

 

 

 

 

 

 

 

 

 

 

 

Biggest Rent Increases

The study found that fair market rents on 3-bedroom properties increased more than 10 percent in 35 counties of those analyzed. The biggest jumps occurred in the following:

  • Midland, TX (up 24%)
  • Denver, CO (up 20%)
  • Asheville, NC (up 19%)
  • Roseburg, OR (up 18%)
  • Seaford, DE (up 18%)

Related: The Pivotal Factor You Probably Don’t Know to Watch for in a Rental Market

What Does This Mean for Investors?

“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,” said Blomquist.

He added, “There are certainly markets where buying single family rentals no longer makes sense because of rapidly rising prices over the past few years. Savvy single family rental investors will tread cautiously in such markets despite the siren song of strong home price appreciation.”

What do you think, investors?

  • Is there a specific demographic you gear your rentals towards?
  • Do you agree with the methodology of this study?
  • Have you found that these trends ring true in your local market?

Leave a comment below, and let’s talk data & demographics!

About Author

Allison Leung

A career writer, editor and blogger, Allison serves as the Lead Editor and Community Manager for BiggerPockets.com. In the past, she has channeled her passion and curiosity for all things real estate into her jobs by working in real estate law and heading a blog about real estate market trends. Don’t ask about her dog, Ace, unless you want to see approximately 500 photos of his (adorable) face.

13 Comments

    • Jeremy T.

      I’m a data geek, and I couldn’t agree more with your commentary re: charts 2-4. I went clicking through the realtytrac article to see if it was represented in a more logical fashion or maybe in tabular format…no luck. Those charts contain some very valuable information, only the way the data is presented is complete chaos.

  1. troy whitney

    Very helpful. Now I can see how I stumbled on Philly. On my third deal there though I live in Seattle, and clearly it’s one of the best places to buy rental property. On the other hand, Seattle is one of the worst. High rents yes, but insanely expensive properties.

  2. Matt Aspen

    Thank you for this post. A newbie question:
    Meaning, I don’t have the means/time to travel around the country to find my investment property and there are a TON of snake oil salesmen … How do you find multi-family rentals out-of-state?

  3. Adam Paxton

    Just getting started in KC. Glad to see it made the list. I’m only going to be here for another year or so, but that changes my goals between now and then a little. I was originally just looking to wholesale the rest of this year but now I think I’ll look to see if I can get some buy and holds going while I’m here.

  4. Julia Rowling

    Glad to see I’m going to be relocating near some of the best markets (in GA), though sorry to see that Greenville, SC doesn’t make it on the list. However, this confirms the impression I’ve been developing as I’ve been researching the market there (that it isn’t great for rentals).

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