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Investors, Take Note: Single-Family Rental Market’s Popularity is Still Surging

for-rent-twoThe single-family rental (SFR) market in America has gained momentum in the last couple of years as the homeownership rate has fallen to nearly a five-decade low. The greater demand for SFR housing has resulted in an increase in the price of rents, which means greater opportunities for investors looking to either enter or expand in the SFR market.

Data released by Altisource’s RentRange on Wednesday ranked the top 25 Metropolitan Statistical Areas (MSAs) in the United States according to the average rental rate increase year-over-year in the fourth quarter of 2015. RentRange also identified the average gross yield (which demonstrates return on investment from a rental property prior to operating costs) generated by rental properties in those markets.

“The single-family rental market remains strong across the U.S. as the homeownership rate continues to decline and a higher percentage of the population migrates to rental housing,” said Walter Charnoff, CEO of the RentRange business. “As the real estate market continues to improve, we are seeing significant rental price increases in many markets, which bodes well for investors in this space.”

Markets throughout the South region proved to be the hottest places for investors, according to the RentRange data. Four states in the South region—Florida, Louisiana, Arkansas, and Tennessee—combined for eight of the top 10 markets with the largest rental rate increases from Q4 2014 to Q4 2015. Markets in the South also accounted for the highest gross yield among the top 25 MSAs.

Three Western states (California, Washington, and Hawaii) contained markets that combined for nine spots on the list of top 25 markets with the highest rent increases, according to RentRange. Gross yields in these Western markets have consistently been among the lowest on the list of top 25 hottest rental markets, however. Home prices in West markets, which are the highest in the nation, are suppressing gross yields, according to RentRange.

2-17 RentRange Graph

The gross yield is the total annual income an investor receives from an investment property divided by the price or value for the property. This figure does not account for any operating expenses including property taxes.

About Author: Brian Honea

Brian Honea's writing and editing career spans nearly two decades across many forms of media. He served as sports editor for two suburban newspaper chains in the DFW area and has freelanced for such publications as the Yahoo! Contributor Network, Dallas Home Improvement magazine, and the Dallas Morning News. He has written four non-fiction sports books, the latest of which, The Life of Coach Chuck Curtis, was published by the TCU Press in December 2014. A lifelong Texan, Brian received his master's degree from Amberton University in Garland.
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