Rental Property Investment ‘Continues to be a Brilliant Strategy’

Contributing Writer, B2R Finance | Real Estate,Real Estate Investment

By Brianna Bobola, Marketing Writer, B2R Finance

Single-family rental investors should find more predictable, steady returns going forward as home price appreciation stabilizes and aligns more closely with trends in rental rates, according to a recent RealtyTrac report about the buy-to-rent market.

Average rental rates on 3-bedroom properties increased 3 percent from a year ago across 285 counties analyzed by real estate data firm RealtyTrac, while average sales prices on 3-bedroom properties increased 4 percent across those same counties.

Potential buy-to-rent returns increased in 41 percent of the 285 counties analyzed thanks to rental rate growth outpacing home price growth in those counties.

The average potential annual gross rental yield was 8.94 percent for 3-bedroom residential properties purchased in the first five months of 2015, down slightly from 9.07 percent in the year-ago period, according to the data.

“Buying rentals continues to be a brilliant strategy that allows investors to hedge their bets in a real estate market shifting away from homeownership and toward a sharing economy,” said Daren Blomquist, vice president at RealtyTrac.

Counties with the highest potential returns

Counties with the highest potential rental returns for 3-bedroom properties purchased in the first five months of 2015 were Clayton County, Ga., in the Atlanta metro area (24.05 percent annual gross rental yield), Bay County, Mich., in the Bay City metro area (19.23 percent), Mahoning County, Ohio, in the Youngstown metro area (19.04 percent), Bibb County, Ga., in the Macon metro area (18.11 percent), and Philadelphia County, Pa. (17.67 percent).Top 10 Markets for Buy-to-Rent Returns

Dozens of others continue to bring in rental returns in the double digits, according to the report. There were 51 counties with a combined population of 18.5 million where potential buy-to-rent returns were 10 percent or higher and where average weekly wages in the fourth quarter of 2014 increased 3 percent or more from a year ago.

These counties included Wayne County, Mich., in the Detroit metro area (15.50 percent annual gross rental yield), Cuyahoga County, Ohio, in the Cleveland metro area (14.62 percent), Milwaukee County, Wis. (12.15 percent), and Erie County, N.Y., in the Buffalo metro area (13.39 percent).

Increased returns over last year

Major counties where potential buy-to-rent returns increased from a year ago included Orange County, Calif., in the Los Angeles metro area, King County, Wash., in the Seattle metro area, Santa Clara County, Calif., in the San Jose metro area, Philadelphia County, Pa., and Suffolk County, located on Long Island in New York.

Best ZIP codes for rental returns

RealtyTrac also analyzed potential buy-to-rent returns in 4,657 zip codes with sufficient fair market rent and home price data in the first five months of 2015.

ZIP codes with the highest potential rental returns on 3-bedroom properties are in metro areas like Detroit, Atlanta, Cleveland, Philadelphia, and Memphis. There were a total of 105 ZIP codes with a gross annual rental yield of 18 percent or higher.

Even with indications that buying has become more affordable than renting in 66 percent of counties analyzed, rents are up 3 percent nationwide, as is property appreciation. Looks like clear skies ahead for the rental property investor’s financial forecast.

RealtyTrac Interactive map

B2R Finance offers rental investors innovative lending products to help unlock equity from existing portfolios and provide the cash needed to build rental portfolios nationwide. For more information about how B2R can help you obtain rental property financing, just call 800-227-8107 or visit www.b2rfinance.com/borrowers and follow us on Twitter @B2RFinance.

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