Commentary by Forbes says that the rise of technology is making single-family rental investments and management easier, leading to the rise of the midsize investor.
Forbes adds that less than 2% of single-family homes are owned by institutional investors, while 87% are owned by investors with fewer than 10 units.
“The biggest increase in market share over the past year has come among investors owning six to 10 single-family rentals, followed by those owning between 11 and 100 rentals,” said Daren Blomquist, SVP at ATTOM Data Solutions. “These smaller to mid-tier investors are benefiting from newfound efficiencies in acquisition, financing and property management that allow them to buy outside their backyard in areas with higher potential returns, and to leverage their money to buy more properties.”
Areas best suited for smaller-level investors are often labeled up-and-coming are “ideal locations” for single-family rental investors.
“For one thing, the price-to-rent ratios are often much more attractive, while yields tend to be higher,” the report states. “Properties in less densely populated areas are also better insulated against a downturn in the housing market as well. Meanwhile, properties in saturated markets are currently performing the worst.”
The markets labeled up-and-coming include: Charleston, South Carolina; Columbus, Ohio; Tempe, Arizona; Evanston, Illinois; Decatur, Georgia; Alpharetta, Georgia; Boise, Idaho; and Jacksonville, Florida.
Additionally, investors are advised to look for low-risk, high-return counties, with potential yields of at least 10%. Up-and-coming markets include markets with property taxes lower than 1% and vacancy rates of no more than 5%.
According to realtor.com, investors are using the popularity of single-family rental to their advantage. Real estate investors purchased 7.7% of all homes in the second quarter of 2019, up 0.6% year-over-year, the most speculation the market has seen 2013.
St. Louis is considered the most appealing destination for both flippers and landlords, with 18.8% of sales as investment properties.
"Twenty years ago, [real estate investors] were all locals," says St. Louis broker and landlord Dennis Norman of MORE Realtors. Now, "we have a lot of investors from California, from Colorado, and even international investors."