At Roofstock we are seeing increasing interest from investors in a number of SFR markets that have historically not gotten much love from the large institutional players.

ATTOM Data Solutions analyzed 449 U.S. counties for potential single family rental returns in 2018 to help real estate investors identify the best places for buying single family rentals this year.

Rental data was from the U.S. Department of Housing and Urban Development, and home price data was from publicly recorded sales deed data collected and licensed by ATTOM Data Solutions.

The average annual gross rental yield (annualized gross rent income divided by median purchase price of single family homes) among the 449 counties was 8.9 percent for 2018, down from an average of 9.2 percent in 2017.

Counties in Baltimore, Macon, Montgomery, Detroit, Atlanta Post Highest Rental Returns

Counties with the highest potential annual gross rental yields for 2018 were Baltimore City, Maryland (28.6 percent); Bibb County, Georgia in the Macon metro area (21.8 percent); Montgomery County, Alabama, in the Montgomery metro area (21.7 percent); Wayne County, Michigan in the Detroit metro area (21.7 percent); and Clayton County, Georgia in the Atlanta metro area (20.3 percent).

“With continued job growth in Cleveland and Atlanta, Divvy is seeing a significant year-over-year increase in the percent of highly-qualified single-family renters, who are often less than two years away from mortgage qualification,” said Tiffany Li, co-founder of Divvy Homes, a tech startup that provides lease options with an equity-building component. “This population is seeking SFRs in neighborhoods that are largely owner-occupied and with family-friendly amenities and good schools. We’ve continued to see strong and growing demand through the Midwest and Southeast for lease options and other unconventional rental options that allow highly-qualified renters to move towards homeownership.”

Along with Wayne County, Michigan, the highest potential annual gross rental yields among counties with a population of at least 1 million were Cuyahoga County (Cleveland), Ohio (11.6 percent); Philadelphia County, Pennsylvania (10.0 percent); Cook County (Chicago), Illinois (9.5 percent); and Harris County (Houston), Texas (9.5 percent).

“At Roofstock we are seeing increasing interest from investors in a number of SFR markets that have historically not gotten much love from the large institutional players,” said Gary Beasley, CEO and co-founder at Roofstock, an online marketplace for single family rentals. “These include many cities in the Midwest, South, Southeast and even certain markets in the Northeast.  Investors are attracted to the strong rental yields in many of these less flashy cities like Cleveland, Pittsburgh and Detroit, as well as perennial favorites like Atlanta, Houston and Charlotte which have been popular with investors for several years. The nice thing about SFR is there is enough variety out there that there really is something for every investor, depending on their unique objectives.”

Rental Returns Increase from Year Ago One-Third of Counties

Potential annual gross rental yields for 2018 increased compared to 2017 in 150 of the 449 counties analyzed in the report (33 percent) led by Rowan County, North Carolina in the Charlotte metro area (up 36 percent); Randolph County, North Carolina in the Greensboro metro area (up 32 percent); Tazewell County, Illinois, in the Peoria metro area (up 21 percent); Baltimore City, Maryland (up 21 percent); and Kings County, California in the Hanford-Corcoran metro area (up 20 percent).

“As the stock market starts to show some weaknesses, investors continue to put their money into cash flowing assets such as rental properties,” said Ross Hamilton, CEO at Connected Investors, an online community for real estate investors. “Many view rental real estate as a way to recession-proof their income and retirement.”

Among counties with a population of at least 1 million, those with the biggest increase in potential annual gross rental yields for 2018 compared to 2017 were Harris County (Houston), Texas (up 7 percent); King County (Seattle), Washington (up 7 percent); Queens County, New York (up 5 percent); Contra Costa County, California (up 4 percent); and Cook County (Chicago), Illinois (up 3 percent).

“The single-family rental market in Seattle remains strong, which is a good thing for the people who own the rentals, but not so good for tenants as rents continue to escalate,” said Matthew Gardner, chief economist with Windermere Real Estate, covering the Seattle market. “Demand for rentals is high but some of this is due to Seattle’s rising home prices. Growth in rental rates is robust in the core Seattle market, but as you move further away from the city it starts to soften due to more modest income growth in those areas.”