While the current housing market is facing a lack of real estate sales inventory, the rental market is on a promising upswing for investors. Because the purchasing price of single-family homes continues to rise, possible home buyers are searching for suitable housing options.
In essence, an investor could purchase a property for $100,000 and earn $15,300 in rental income for the first year. This annual gross rental yield is 15.3% of the initial cost to buy the home. Of course, landlords also need to figure in the costs of maintenance, property taxes, vacant months and other expenses in owning a rental house. Most landlords estimate that up to 40% of their income is spent on business expenditures.
According to RealtyTrac, a California-based housing data company, the following markets are the best areas for investing in a single-family rental property based on several factors such as housing prices, the strength of the local economy and rental rates.
1. Genessee County, MI has 15.3% annual gross rental yield.
2. Camden County, NJ (outside the greater Philadelphia area) is at 12.9%.
3. Woodbury County, IA (including Sioux City) is at 11.4%.
In a separate study, RealtyTrac listed these counties as the best locations to attract Millennial renters.
1. Milwaukee County, WI has a 15.7% annual gross rental yield.
2. Richmond County, VA is at 13.7%.
3. Bell County, TX (north of Austin) is at 11.9%.
Overall, this is good news for landlords and potential investors, particularly in these counties and other popular metropolitan areas.