InvestmentsReal Estate

Investors: Here are the top markets to invest in rental properties

All but 4 markets saw rent increases from last year

Home prices are outpacing gains in rental pricing, however rental prices are still showing increases from last year.

The most recent Home Price Index report from CoreLogic shows rent prices increased in April, and compared them to home price growth.

“This has led home-price growth to outpace rent gains,” CoreLogic Chief Economist Frank Nothaft said. “Nationally, home prices were up 6.9% over the last year, while rent growth for single-family rental homes recorded a 3% rise through April, according to the CoreLogic Single-Family Rental Index.”

RentRange, a provider of market data and analytics for the housing industry, released data ranking the top metropolitan statistical areas by the highest average gross yield for single-family homes during the first quarter of 2017.

Some of the highest ranking metros were located in the Midwest and Northeast.

“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,” said Dennis Cisterna, RentRange Data Services chief revenue officer.

“Today’s investor has a leg up on their predecessors because this type of information is now readily available in a way it was never before,” Cisterna said. “While many markets may have high yields, they may have quite different rent growth percentages and vacancy rates. A strong market would generally have a combination of high yields, low vacancies and high rent growth.”

Only four of the top 25 markets included in the high-yielding list show a decline in rent over the past year: McAllen, Canton, Columbia and Pittsburgh.

Here are the top five MSAs where investors will see the highest average gross yield:

5. Rochester, New York – 15.6%

Change in rent during first quarter: Increased 2.1%

Average vacancy rate: 5.9%

4. Youngstown-Warren-Boardman, Ohio-Pennsylvania – 15.7%

Change in rent during first quarter: Increased 5.3%

Average vacancy rate: 10.5%

3. Milwaukee-Waukesha-West Allis, Wisconsin – 15.8%

Change in rent during first quarter: Increased 3.8%

Average vacancy rate: 5.3%

2. Cleveland-Elyria, Ohio – 16.6%

Change in rent during first quarter: Increased 0.9%

Average vacancy rate: 8%

1. Detroit-Warren-Dearborn, Michigan – 17%

Change in rent during first quarter: Increased 0.9%

Average vacancy rate: 8.6%

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