This week, analysts at LendingOne set out to find the top single-family rental markets where, despite spiked mortgage rates and spiked home prices, investors can still find cash-flowing properties.
LendingOne’s top-line findings:
- A lack of inventory presents a double-edged sword for investors. On one hand, it helps to maintain the value of investors’ current portfolios; on the other hand, it makes it more challenging to find cash-flowing properties.
- Many of the best cash-flowing opportunities right now are in lower-cost Midwest and Northeast markets.
- Single-family rental investors are finding fewer cash-flowing opportunities in high-cost coastal markets like San Francisco, as well as pandemic boomtowns like Salt Lake City and Austin.
For the analysis, we sourced data from ATTOM Data, which encompasses regional median rents and median home prices in the nation’s largest counties. A gross rental yield was calculated by dividing the annualized gross rent income by the median purchase price.
Among the 50 largest U.S. counties, these 5 have the highest annual gross yields:
- Wayne County, Michigan: 12.0%
- Allegheny County, Pennsylvania: 11.2%
- Cuyahoga County, Ohio: 10.2%
- Cook County, Illinois: 10.1%
- Riverside County, California: 9.7%
Among the 50 largest U.S. counties, these 5 have the lowest annual gross yields:
- Santa Clara County, California: 3.0%
- Honolulu County, Hawaii: 4.1%
- Fairfax County, Virginia: 4.2%
- Kings County, New York: 4.4%
- Alameda County, California: 4.4%
What’s the big picture story?
Spiked mortgage rates, which came right after a period of historic home price growth, have made it increasingly difficult for investors to uncover new cash-flowing single-family properties. LendingOne finds this challenge is particularly pronounced in high-cost markets like D.C., Salt Lake City, and San Francisco. Instead, investors are discovering better success in affordable pockets of the Midwest and Northeast, regions they had previously overlooked. In places like Cleveland and Pittsburgh, home prices haven't stretched as far beyond local incomes and rents.