Top markets for single-family house rental yield revealed

by Steve Randall13 Jun 2017
Metros in the Midwest and Northeast are likely to give the highest yield to investors in single-family houses for the rental market a new study has found.

The analysis by RentRange looked at the top 25 metros and ranked them by highest average gross yield for single-family homes during the first quarter of 2017.

It also considered the average annual increase in rental rates, vacancy rates and investor purchases over the 12-month period.

“While many markets may have high yields, they may have quite different rent growth percentages and vacancy rates,” said Dennis Cisterna, chief revenue officer, RentRange Data Services. “A strong market would generally have a combination of high yields, low vacancies and high rent growth.”

Generally, the increase in selling prices in the Midwest and Northeast have lagged faster-growing prices in the West and South, making these markets attractive for investors.

Detroit, Cleveland and Milwaukee top the list for yields with averages of 17%, 16.6% and 15.8% respectively.

Some notable exceptions to the Midwest and Northeast domination are areas such as Oklahoma City, McAllen, Columbia, Shreveport and Birmingham. While they may not have the cosmopolitan attraction of larger regional markets like Atlanta, Charlotte or Houston, the rents are generally more affordable in these areas.

Only four of the markets included in the high-yielding list show a decline in rent over the past year: McAllen, Canton, Columbia and Pittsburgh, while two markets in Michigan — Flint and Lansing — showed gains exceeding 9%.

“The first step every investor should take when looking to invest in single-family rentals is to conduct due diligence by researching historical housing and rental data, the local economy and property-specific financial information like insurance, taxes, gross yield, net yield and cash flow,” added Cisterna.

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