Charlotte, Orlando Lead Single-Family Rental Markets

Middle-market cities make up most of the top 10 markets where investors can affordably buy single-family rental properties, reported HomeUnion, Irvine, Calif.

“Places like San Francisco, Miami or Brooklyn are not on our list, because homeowners–who have different motivations than investors–have driven up prices in those markets to the point where cap rate and gross yield calculations simply don’t make sense for investors,” said HomeUnion CEO Don Ganguly. “Likewise, many of the sand state markets like Las Vegas and Phoenix aren’t on the list because institutional investors have absorbed much of the distressed inventory and raised the barriers of entry for smaller retail players.”

HomeUnion examined median investment property prices, year-over-year job growth, gross rental yield and housing affordability to determine the best markets for non-owner occupied properties. The report also anticipates future demand, cost of entry, profitability and the likelihood that renters will transition into ownership.

Ganguly said Charlotte, N.C. topped the list largely because of its strong job growth. It also ranked 21st in investment home price and 27th in gross rental yield.  The Orlando-Kissimmee-Sanford, Fla. metro ranked second, followed by Baltimore-Columbia-Towson, Md.

“The residential real estate market continues to be an attractive investment opportunity, especially for investors who capitalize on market trends and are poised to act,” said Brandon Hammermeister, vice president of single-family rental lender Center Street Lending. He cited Moody’s data predicting that the market will grow an average of nearly three percent per year through 2019.

Ganguly said single-family rental investors should focus on the long-term return. “Nationally, macroeconomic factors such as lower homeownership rates are quite favorable for SFR investing, but real estate is still all about location and finding accessible markets that have low entry points, like Cincinnati and Birmingham, or high gross rental yields, like Milwaukee.”