RealtyTrac Reveals Top Locales For Investing In Rentals

Ohio, Oklahoma and Florida are the top states for investing in rental properties, according to RealtyTrac's Residential Property Rental Report for the third quarter.

However, due to increased prices, the rate of return on rental properties is not as strong as it was a year ago. Investors are now getting an average return of about 9.06%, whereas in the third quarter of 2013, they were closer to 9.65%, according to the report.

‘The single family rental market is still strong, with returns averaging 9 percent in the 586 counties analyzed,’ says Daren Blomquist, vice president at RealtyTrac, in a statement. ‘Even so, the market is softening, with those same 586 counties averaging a nearly 10 percent return a year ago.’

Of course, as with all things real estate, the rate of return all depends on which market you're taking about.

‘In the high-risk, high-yield markets, where unemployment and vacancy rates are higher than national averages, the average return was a whopping 19 percent, actually up from a year ago, thanks to a strong increase in rental rates,’ Blomquist adds. ‘Home prices, meanwhile, were more volatile in the high-risk, high-yield markets, with three out of the 16 posting double-digit percentage decreases in median home prices from a year ago.’

The report analyzes median sales prices for residential properties and average fair market rents for three bedroom properties in 586 U.S. counties. Rental returns were calculated using annual gross rental yields: The average fair market rent of three-bedroom homes in each county, annualized, and divided by the median sales price of residential properties in the third quarter.

The report shows that although home prices in the markets analyzed increased an average of about 7% in the third quarter compared to the third quarter of 2013, the average rent for a three-bedroom apartment in those markets increased an average of less than 1%.

Markets with the highest returns on rental properties in the third quarter included Edgecombe County, N.C. (41.57% annual gross rental yield); Clayton County, Ga. (26.88%); Duplin County, N.C. (24.40%); Howard County, Ind. (24.00%); and Putnam County, Fla.

Markets with the lowest rental returns included New York County (Manhattan), N.Y. (2.40%); San Francisco County (3.16%); Kings County, N.Y. (3.64%); Williamson County, Tenn. (3.73%); and Marin County, Calif. (3.75%).

Then there are what RealtyTrac calls the ’16 Safe Havens for Single-Family Rentals,’ which are counties where the unemployment rate was below the national average of 6.2% in July and the rental vacancy rate was below the national average of 8.7% as of the end of 2012, but all these counties also had an annual gross rental yield of 10% or higher. Included in this group, for the third quarter, was Clark County, Ohio (14.17% annual gross rental yield), Pottawatomie County, Okla. (13.50%); Broward County, Fla. (12.99%), Creek County, Okla., (12.93%) and Belmont County, Ohio (12.05%).

The report also lists the ’16 High-Risk, High-Yield Hotspots for Single-Family Rentals’ -high-risk, high-yield hot spots for single-family rental investing. In these counties, the unemployment rate was above 6.2% and the rental vacancy rate was above the national average, yet all these counties had an annual gross rental yield of 14% or higher. Included in this group are Edgecombe, N.C. (41.57% annual gross rental yield); Clayton, Ga. (26.88%); Spalding, Ga. (20.35%); Duplin County, N.C. (24.40%); and Wayne County, Mich. (19.88%).

To read the full report, click here.


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