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Why Rental Investment Markets Spring Forward in Winter

Winter might be the ideal time to buy for rental investors looking at sweet deals, according to a report released Thursday by real estate data analytics firm HouseCanary. The report has found a correlation between parts of the U.S. with relatively cold winter weather and rental investment markets.

Markets that show a Q4 dip but have relatively high effective gross yield — a measurement of rental yield that accommodates local property taxes in addition to home prices and rent costs in the area—are the ones where rental investors will likely find strong opportunities to snap up new properties for their portfolios even as home price growth stabilized or declined.

According to Alex Villacorta, EVP of Analytics at HouseCanary, “Weather plays a very strong factor in the seasonal dip.” The biggest seasonal growth slowdowns are clustered in Michigan, Minnesota, Ohio, Pennsylvania, and Connecticut — all markets in temperate zones that will likely experience cooler temperatures along with snow and ice during Q4.

So which are the hot and not-so-hot markets for rental investment in the winter of 2017?

“The three best markets for Q4 rental investment opportunities were Cleveland, Detroit, and Columbus, Ohio, markets where a seasonal slowdown is definitely present, but that still offer relatively high EGY for investors, giving them an opportunity to buy low and rent high,” the report noted.

By contrast, a handful of markets seem to have a year-round homebuying season, with no significant dip in sales during Q4. They include San Jose, San Diego, and Los Angeles — which were the three worst markets in the top 50 market statistical areas for Q4 rental investors to find high-return rental properties. According to the analysis, this occurred “because there is no seasonal slowdown where investors might be able to snap up a great deal.”


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