“This top 25 list includes zip codes that not only have solid rental returns and positive cash flow opportunities, but are also located in neighborhoods with relatively low vacancy rates and with home price growth and population growth — which should continue to put upward pressure on rental rates,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “Nearly half of these zip codes — 11 — have been discovered by larger investors, evidenced by an increase in the share of institutional investor purchases compared to a year ago.”

Top zip codes for buying single family rentals in Atlanta, Houston, Central Florida, Dallas
Among the top 25 zip codes, those with the highest potential annual gross rental yield were 30238 in the Atlanta metro area (17.7 percent); 77373 in the Houston metro area (13.5 percent); 34472 in the Ocala, Florida metro area (13.1 percent); 76140 in the Dallas-Fort Worth metro area (12.7 percent); and 30228 in the Atlanta metro area (12.6 percent).

“I can buy lots in areas that I can’t sell homes, but I can rent,” said Adam Whitmire, director of acquisitions for Atlanta-based Whitmire Group, explaining his company has shifted from buying existing homes as rentals to primarily buying lots and building new homes as rentals. Whitmire said neighborhoods south of Atlanta with a higher share of renters are good markets for the build-to-rent strategy.

Institutional investor share down nationwide, up in 37 percent of markets
Nationwide institutional investors accounted for 2.9 percent of all single family home sales in the third quarter.

“One of the things we’re excited about is the secondary and tertiary markets that are getting some action,” said Greg Rand, CEO at OwnAmerica, an online platform designed to facilitate the exchange of occupied rental properties. “What was being done in Nashville, they’re doing in Chattanooga instead. Oklahoma City instead of Dallas.”

Highest average rental yields in Detroit, Philadelphia, Chicago, Baltimore, Memphis
The average annual gross rental yield in the 4,854 zip codes analyzed in the report was 7.7 percent for properties purchased in Q3 2017, down from 8.0 percent in Q3 2016 and 8.5 percent in Q3 2015. The average gross rental yield in those zip codes based on Q3 2011 median prices and fair market rents was 10.9 percent.

“With housing affordability remaining a concern for many across Southern California, the number of cash-flowing rental property acquisitions are limited in the region,” said Michael Mahon, president at First Team Real Estate covering the Southern California market. “However, some Southern California homeowners are leveraging the equity in their homes to purchase single family rental properties in other parts of the country.”

“We love the SFR rental model and the opportunity that exists in the market, and we’re no longer able to find any good yields in Florida. In order to grow that business we have to go elsewhere,” said Jamie Nahon, president of Eagle River Homes, which he said has acquired about 150 single family rentals mostly in Florida over the past five years.

Lowest average rental yields in Miami, Los Angeles, Santa Barbara, New York, San Jose
The lowest potential rental property returns were in coastal markets.

“The single-family rental market in the Seattle area has peaked and rental rates will continue to take a hit,” said Matthew Gardner, chief economist at Windermere Real Estate, covering the Seattle market, where the King County annual gross rental yield for properties purchased in Q3 2017 ranked 25th lowest among the 439 counties analyzed in the report.

Full Report & Methodology

About ATTOM Data Solutions
ATTOM Data Solutions is the curator of the ATTOM Data Warehouse, a multi-sourced national property database that blends property tax, deed, mortgage, foreclosure, environmental risk, natural hazard, health hazards, neighborhood characteristics and other property characteristic data for more than 150 million U.S. residential and commercial properties. The ATTOM Data Warehouse delivers actionable data to businesses, consumers, government agencies, universities, policymakers including bulk file licenses, APIs and customized reports.

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SOURCE ATTOM Data Solutions

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