Single-family rentals are a niche market for landlords that can be lucrative if you have the right properties in the right markets. Fortunately, for serious rental investors, ATTOM Data Solutions has ranked single-family rental markets for 2019. There are some interesting findings on this list.
The firm analyzed 432 markets nationwide and determined that the average annual gross rental yield is 8.8 percent, up one-tenth of a percent since last year. That’s good news. So where are the highest rents?
Where to Find The Highest Single-Family Rental Returns in 2019
In over half the counties analyzed, rental returns increased from a year ago. In 2019, the highest single-family rental returns are in the following areas:
- 5 percent in Baltimore City, Maryland
- 9 percent in Bibb County, Georgia
- 2 percent in Cumberland, New Jersey
- 1 percent in Winnebago, Illinois
- 1 percent in Wayne County, Michigan
Wayne County, Michigan is a great benchmark community since it consists of Detroit and contains a population of over 1 million residents. Other counties in the same demographic show modest gains in returns over last year. These include:
- Cuyahoga County, Ohio with 12.0 percent annual gross rental yields
- Allegheny County, Pennsylvania with 10.9 percent
- Cook County, Illinois with 9.7 percent
- Philadelphia County, Pennsylvania with 9.4 percent
Counties in the west mid-Atlantic and east midwest sections of the country seem to fare well with single-family rentals. That may be due to higher property values and lower wages, which put homeownership out of reach for many income earners. But what about the areas with lower single-family rental returns? Where are they located?
Where the Lowest Single-Family Rental Returns are Located
The part of the country with the lowest single-family gross rental returns is in the western states. Specifically, most of the counties in this category are in California.
- 4 percent in San Mateo County, California
- 7 percent in San Francisco, California
- 0 percent in Marin County, California
- 2 percent in Santa Clara, California
- 3 percent in Kings County, New York
Brooklyn, New York, where Kings County is located, seems to be the outlier. However, that county does have one thing in common with Santa Clara County in California. Both counties have a population of at least 1 million. Other counties with a similar population and that show low potential for annual gross rental yields include:
- Fairfax County, Virginia (where Washington D.C. is located) shows 4.7 percent potential
- Queens County, New York shows 4.8 percent
- Alameda County, California shows 4.9 percent
- Orange County, California shows 5.0 percent
Where Rents Are Rising Faster Than Wages
Areas where rents are rising faster than wages could be areas to stay away from. That’s because rising rents could cause renters to seek home ownership options, but every geographic area is different. If the cost of ownership is out of reach, wage earners could still prefer renting, but they may need to downsize their quarters or cut expenses in other areas.
Rents are rising faster than wages in 236 counties, 55 percent of those studied. That includes the following areas:
- Los Angeles County, California
- Harris County, Texas
- Maricopa County, Phoenix
- San Diego County, California
- Orange County, California
The reverse is true in the following counties:
- Cook County, Illinois
- Kings County, New York
- Clark County, Nevada
- Tarrant County, Texas
When wages are rising faster than rents, renters could seek home ownership options. Investors looking for good rental opportunities should pay close attention to this data and invest responsibly.