These single-family housing markets have the lowest—and highest—rental yields

These single-family housing markets have the lowest—and highest—rental yields

According to data from Parcl Labs, landlords renting out single-family homes in some Midwestern cities are seeing the highest returns.

BY Lance Lambert

Want more stories from Lance Lambert’s ResiClub in your inbox? Subscribe to the free, daily ResiClub newsletter.

Real estate investors, like all investors, chase returns. To find out which single-family housing markets have the highest and lowest yields, ResiClub reached out to the data pros at Parcl Labs, a fast-growing residential real estate analytics firm. They provided us with their “gross yield” calculation.

“Gross yield is determined by dividing the annual median rental income by the median price of new listings for sale (cost of acquisition),” says Jason Lewis, cofounder of Parcl Labs. “We calculate annual median rental income by multiplying the monthly median price of new rental listings by 12. This metric represents the annual return on investment before any deductions for expenses, taxes, or other associated costs are made. A higher gross yield indicates a greater potential for investor returns.”

Among the 52 single-family rental markets that Parcl Labs analyzed, these five metro areas had the highest “gross yields.”

Cleveland: 8.4%

Buffalo-Cheektowaga: 8.1%

Chicago-Naperville-Elgin: 7.8%

Detroit-Warren-Dearborn: 7.5%

Pittsburgh: 7.4%

Among the 52 single-family rental markets that Parcl Labs analyzed, these five metro areas had the lowest “gross yields.”

 

San Jose-Sunnyvale-Santa Clara: 3.2%

San Francisco-Oakland-Fremont: 4.1%

Los Angeles-Long Beach-Anaheim: 4.2%

Salt Lake City-Murray: 4.3%

San Diego-Chula Vista-Carlsbad: 4.4%

Big picture: Single-family investors are finding fewer cash-flowing opportunities in high-cost Western housing markets and boomtowns like Nashville, Salt Lake City, and Austin. Instead, the best cash-flowing opportunities/returns appear to be found in lower-cost Midwest and Northeast markets. That finding explains why investors are pulling back in housing markets such as San Jose, San Diego, and Los Angeles, and buying up more properties than they are selling in housing markets like Indianapolis and Cleveland.

 

ABOUT THE AUTHOR

Lance Lambert is the co-founder and editor of ResiClub, a media and research company dedicated to in-depth tracking, reporting, and analysis of regional housing markets. Lambert, the former real estate editor of Fortune Magazine, has solidified his reputation as the nation’s foremost data journalist and beat reporter in the residential real estate space 


Fast Company

(6)