As lifestyles and buying behaviors evolve, more people are looking at renting instead of owning a home.
In general, Americans are tending to move jobs more frequently, wait longer to buy their first home, and get married and have children later in life — shifts that are creating opportunities for investors in single-family rentals.
Such trends are fortified by some important data. For one, renting recently become more affordable than buying in every single U.S. state, according to data from the U.S. Census Bureau. In addition to that, monthly homeownership costs increased 14 percent over the past year compared to just 4 percent for rent increases, according to an analysis by CNBC.
For investors eyeing a piece of the renting pie, real estate research firm ATTOM Data Solutions recently released a report detailing some of the best counties for buying single-family rental homes.
“Buying single-family homes to rent them out is a better deal for investors so far this year, than it was at the same time in 2018, as profit margins are rising in a majority of counties across the United States,” said Todd Teta, ATTOM’s chief product officer. “Last year at this time, investors were seeing returns drop in three-quarters of the counties that were analyzed. So far this year, those margins are up in six out of every 10 counties analyzed. But despite the generally rosier picture, profits vary widely and investing in the single-family home rental market is not always a great move. The typical bottom-line gain from county to county this year has ranged from as high as 29 percent to as little as 3 percent.”
To compile its comprehensive ranking, ATTOM analyzed single-family rental returns in 432 U.S. counties with populations of at least 100,000 and sufficient rental and home price data, the company said. It derived the data from the U.S. Department of Housing and Urban Development, and publicly-available home price data.
The counties with the biggest potential for annual gross rental yields far surpass the national average of 8.8 percent in 2018, according to ATTOM’s report. Baltimore City, Maryland, took the top spot at 24.5 percent in annual gross rental yields, followed by Bibb County, Georgia (in the Macon metro area) at 21.9 percent and Cumberland, New Jersey (in the Vineland-Bridgeton metro area) at 21.2 percent.
When you look at counties with much larger populations with at least 1 million people, annual yields precipitously drop but still present investors solid opportunities. Wayne County, Michigan, and Cuyahoga County, Ohio, posted the highest potential annual gross rental yields with 12 percent, followed by Allegheny County, Pennsylvania, at 10.9 percent; Cook County, Illinois, at 9.7 percent; and Philadelphia County, Pennsylvania at 9.4 percent.
While growth rates vary widely between counties, the single-family rental market is in general growing across the nation, ATTOM found. Potential annual gross rental yields for 2019 grew compared to 2018 in 248 of 432 of the counties analyzed, led by Buncombe County, North Carolina at 29.1 percent; Santa Clara County, California, at 24.8 percent; and Henderson County, North Carolina at 24.6 percent.
To look at all 432 single-family rental markets analyzed by ATTOM, check out the interactive map below.