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

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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.

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.

14 Comments

  1. Jeff M.

    Thank you, Allison:

    Does this metric correlate to the 2% rule? I know most of us realize the 2% rule is crazy hard to find and impossible in some markets. But I think the 2% rule would equal 24% gross rental yield, right? If so, what percentage do you look for on an investment? Thanks.

  2. paul gupta

    My investments typically have 0.75-1%. For places picked up in 2009-12 the yield is much higher. But removing those outliers, 2% ers tend to be ones to avoid (there’a a reason its that cheap…). Staying with the lower returns FOR THE SAME METRO gives an easier place to manage and a more liquid (=desirable) investment.

  3. George Ghiorse on

    Interesting but I’d rather see a Net Cash Flow analysis rather than a Gross Rental Yield. It also appears that the RealtyTrac numbers are very misleading as it uses the median price of sf houses vs. median rents to come up with it’s % returns. Most investors buy rentals at a lot lower price than the median. In the Houston market, if you paid cash for a rental, your ROI would be in the 8-12% range. If you finance, you’d be more in the 17-25% range ROI.

  4. Don Miller Jr

    These numbers for Baltimore may or may not be perfect but I’ve owned rentals in Baltimore for over 30 years and the potential returns are about as good as I’ve seen them (aside from when the market collapsed 8 years ago).

    BUT, you’d better know Baltimore because as we are painfully aware over the last year, it could be a powder keg in the coming months. The majority of areas of Baltimore are perfectly fine, but you won’t get those numbers easily.

    Unfortunately most of the investors purchasing rentals in the city simply don’t understand the risks, let alone how to run their numbers properly. Just because it cash flows, doesn’t mean you should be buying it.

    As George mentioned, I’d rather work with ROI. I can balance ROI with the risk in any particular area of the city.

  5. Kevin Wall

    I can personally attest to the returns in the Baltimore market. We have been consistently earning between 20 and 30% returns for our Turnkey Clients. The rental market tied with public and private investment, as well as a steady job growth makeso this market a huge opportunity for those looking to build a healthy portfolio of SFRs.

  6. Paul Halphen

    This information is useful especially when it is paired with factors that calculate actual returns. I can hold many factors consistent across two metropolitan areas, yet achieve totally different investment results. Taxes, weather (thus capx), and other factors need to be considered in conjunction with data like this. Some areas the taxes are so bad it can lower an actual return by 33%.

  7. Christopher Smith

    One item that’s seem to be missing to some significant degree from many of these articles is an adjustment for RISK. Coming from the investment banking side we would never present yields with appropriately discounting them for the risks incurred (whether it be done directly, or at least indirectly). Perhaps the RE side of the house cares little about risk adjusting or perhaps they feel they have better control over the various elements of risk, but in any event it seems to be a rather “risky” way to perform a true financial analysis for investment returns.

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