The Top 25 Rental Markets to Invest
The RentRange® release of the top yielding rental markets in the first quarter of 2017 is now available.
For investors seeking high yielding rental property, these top 25 markets might be worth consideration. Unsurprisingly, the top returning markets in the first quarter of 2017 are in the Midwest and Northeastern parts of the country, as the coasts continue to experience high home prices and subsequently, lower return on investment.
As RentRange Data Services Chief Revenue Officer, Dennis Cisterna remarks, “The first step every investor should take when looking to invest in single-family rentals is to conduct due diligence by researching historical housing and rental data, the local economy and property-specific financial information like insurance, taxes, gross yield, net yield and cash flow.” Investors today have more information than was historically available, making it easier to identify strong markets with a healthy mix of high yields, low vacancies and projected rental growth.
The top 25 metropolitan statistical areas (MSAs) with the highest average gross yields are:
- Detroit-Warren-Dearborn, MI: 17% gross yield
- Cleveland-Elyria, OH: 16.6% gross yield
- Milwaukee-Waukesha-West Allis, WI: 15.8% gross yield
- Youngstown-Warren-Boardman, OH-PA: 15.7% gross yield
- Rochester, NY: 15.6% gross yield
- Dayton, OH: 15.1% gross yield
- Toledo, OH: 15.0% gross yield*
- Flint, MI: 15.0% gross yield*
- Syracuse, NY: 15.0% gross yield*
- McAllen-Edinburg-Mission, TX: 14.5% gross yield
- Birmingham-Hoover, AL: 14.0% gross yield
- Memphis, TN-MS-AR: 13.9% gross yield
- Tulsa, OK: 13.7% gross yield
- Mobile, AL: 13.5% gross yield*
- Canton-Massillon, OH: 13.5% gross yield*
- Kansas City, MO-KS: 13.4% gross yield
- St. Louis, MO-IL: 13.3% gross yield
- Oklahoma City, OK: 13.2% gross yield*
- Buffalo-Cheektowaga-Niagara Falls, NY: 13.2% gross yield*
- Akron, OH: 13.2% gross yield*
- Lansing-East Lansing, MI: 13.2% gross yield*
- Shreveport-Bossier City, LA: 13.1% gross yield*
- Indianapolis-Carmel-Anderson, IN: 13.1% gross yield*
- Columbia, SC: 13.1% gross yield*
- Pittsburgh, PA: 12.8% gross yield
With the exception of McAllen-Edinburg-Mission, TX, Canton-Massillon, OH, Columbia, SC and Pittsburgh, PA, all of the above metros saw rental increases in the first quarter along with strong gross yields. The metros exhibiting the most impressive rental increases include Lansing-East Lansing, MI, Flint, MI and Youngstown-Warren-Boardman, OH-PA with changes upward of 9.4% in Q1.
The RentRange methodology pulls averages from three-bedroom homes, gathering data on approximately 250,000 single-family homes per month. The Q1 release also included insight into the amount of investor purchases happening in these high returning markets. The Detroit MSA had by far the highest number of investor purchases in Q1 2017 compared with Q1 2016, thanks to a whopping 45,159 home sales. St. Louis came in at number two with nearly 14,000 investor purchases in the past year, followed by Rochester, NY with almost 11,000 investor sales.
Lastly, the release included average vacancy rates in Q1 in these top 25 MSAs. According to The U.S. Census Bureau, the national average vacancy rate as of April 2017 is 7.0% for rental housing. When evaluating prospective investment markets, vacancy is a crucial metric to factor in, as it helps to gauge rental demand. With lower vacancy, investors can often charge higher rent rates and mitigate the risk of lost income because of unoccupied units. Standout vacancy rates on the top 25 list include Pittsburgh at 4.3%, Canton-Massillon at 4.4%, and Indianapolis and Oklahoma City both with 4.5% vacancies.
For the full release, see the image below. Ready to add to your investment portfolio in one of these strong yielding markets? Check out Investability.com for turnkey inventory or Hubzu.com for distressed auction inventory.