Two new reports point to the best markets for investors seeking to profit from the single-family rental market. RentRange, a housing market data analytics firm, ranked the top 25 U.S. markets for rental rate increases on single family homes. It measured the gains between the second quarters of 2015 and 2016.
California and Florida had the most markets in the top 25, as these states are seeing the biggest gains in home values and therefore the biggest gains in rental demand. Low vacancy rates in these states are driving rents higher. Cape Coral-Fort Myers, Florida, topped the list with a 26 percent annual rent gain. New Orleans came in second at nearly 21 percent and Seattle third at almost 17 percent.
As for the best rental returns, which is the income return from an investment prior to operating costs, two markets are new to the ranking: Grand Rapids, Michigan, and Pittsburgh ranked first and third, with average gross yields over 15 percent. This means the properties rent for a lot compared with the home's value. Syracuse, New York, rounds out the top three.
In another analysis of rental markets, HomeUnion, an online real estate investment management firm based in Irvine, California, looked at the 31 metropolitan areas with NFL football teams and ranked which single family rental markets will perform best through the end of this year. It looked at employment, rent growth and turnover time, as well as rent-to-income ratio, apartment construction and single-family permits.
"Most of the metros near the top of the list have robust job growth, which is the primary driver of renter household formation. As these markets continue to add new jobs, we expect renter demand to remain healthy through the current expansion cycle," said Steve Hovland, director of research for HomeUnion.