Buying a home and renting it continues to be a great way for individuals to make a solid investment and increase income, but with so many U.S. markets dominated by large investors, how is a lone buyer to find reasonably priced inventory?
The key is to identify markets that aren't dominated by investors yet still have high gross rental yields – which is the expected return on investment before accounting for taxes, maintenance fees and other costs – as well as low unemployment.
To that end, RealtyTrac has teamed up with RentRange to provide a list of the ‘Top 25 Hidden Gem Single-Family Rental Markets.’ The list is developed by combining gross rental yield data, provided by RentRange; institutional investor sales data, provided by RealtyTrac; and unemployment data for more than 450 counties with populations of 100,000 or more.
The analysis is limited to single-family homes with three bedrooms. It sticks to counties where institutional investor purchases accounted for 5% or less of all residential sales in the three-month period ending in July and where unemployment was less than 7.5%.
The list is accompanied by interactive charts and graphs, making the job of locating ideal markets faster and simpler.
‘Buying single-family homes as rentals still yields solid returns in many markets across the nation, but it is difficult for individual investors and even small-to medium-sized institutional investors to find reasonably priced inventory in markets dominated by the 800-pound gorillas in the single-family rental space,’ says Daren Blomquist, vice president at RealtyTrac. ‘With this analysis, we've identified the top overlooked markets where single-family rentals still make good financial sense but where there is little to no competition from the big players.’
Wichita County, Texas, is currently number one on the list. The county boasts a median market value of $84,000 (for a three-bedroom home), a median rent of $938, and a gross rental yield of 13.4%. As of July, investor sales represented 4.5% of all sales in the county, and unemployment was 6.8%.
For comparison purposes, the list also includes the ‘Top 25 Investor-Saturated Single-Family Rental Markets.’ According to this list, Clayton, Ga., had the highest percentage of investor sales in July, with 50% of all sales going to investors.
‘Real estate investment opportunities vary greatly market by market,’ said Wally Charnoff, CEO of RentRange. ‘The availability of gross rental yield information and other valuable analytics empower buyers to make more scientific decisions about where to invest.’
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