Smaller Investors Powering Single-Family Rental Market

Despite declining returns in many areas, the single-family rental market continues to grow due to more activity by smaller and middle-tier investors, reported ATTOM Data Solutions, Irvine, Calif.

“The biggest increase in market share over the past year has come among investors owning six to 10 single-family rentals, followed by those owning between 11 and 100 rentals,” said ATTOM Data Solutions Senior Vice President Daren Blomquist. “These smaller to mid-tier investors are benefitting from newfound efficiencies in acquisition, financing and property management that allow them to buy ‘outside their backyard’ in areas with higher potential returns and to leverage their money to buy more properties.”

Gary Beasley, CEO of SFR online marketplace Roofstock, Oakland, Calif., said he has seen increasing interest from investors in a number of single-family rental markets that have historically not received much attention from large institutional players. “These include many cities in the Midwest, South, Southeast and even certain markets in the Northeast,” he said. “Investors are attracted to the strong rental yields in many of these less flashy cities like Cleveland, Pittsburgh and Detroit, as well as perennial favorites like Atlanta, Houston and Charlotte that have been popular with investors for several years.”

ATTOM said counties with the highest potential annual gross rental yields include Baltimore City, Md. (28.6 percent), Bibb County, Ga. (Macon), (21.8 percent), Montgomery County, Ala., (21.7 percent) and Wayne County, Mich. (Detroit), (21.7 percent). The highest potential annual gross rental yields among counties with a population exceeding 1 million were Cuyahoga County, Ohio (Cleveland), (11.6 percent), Philadelphia County, Pa. (10.0 percent), Cook County, Ill. (Chicago), (9.5 percent) and Harris County, Texas (Houston), (9.5 percent).

Counties with the lowest potential annual gross rental yields for 2018 included Arlington, Va., (Washington, D.C.), (3.6 percent) and Santa Clara and San Mateo Counties in California at 3.6 and 3.7 percent, respectively, ATTOM said. The lowest potential annual gross rental yields among counties with population exceeding 1 million were in Orange County, Calif. and Fairfax County in suburban Washington, D.C.