SFR Returns Growing But Uneven

Michael Tucker mtucker@mba.org

March 21, 2019


Buying single-family houses to rent them out is more appealing to investors now than a year ago, reported ATTOM Data Solutions, Irvine, Calif.

Single-family rental assets' average annual gross rental yield rose 10 basis points during the first quarter to 8.8 percent, but that growth was not universal, said ATTOM Chief Product Officer Todd Teta.

"Profit margins are rising in a majority of counties across the United States," Teta said. He noted in first-quarter 2018 investors saw returns drop in three-quarters of the counties analyzed. Those margins increased in six of 10 counties analyzed this year. "But despite the generally rosier picture, profits vary widely and investing in the single-family home rental market is not always a great move," Teta cautioned. He said typical bottom-line gains ranged from as high as 29 percent to as little as 3 percent this year, depending on the county the property sits in.

ATTOM's Q1 2019 Single-Family Rental Market report said counties with the highest potential annual gross rental yields for 2019 include Baltimore (24.5 percent); Bibb County, Ga. (21.9 percent); Cumberland, N.J. (21.2 percent); Winnebago, Ill. and Wayne County, Mich. (17.1 percent).

Counties in the San Francisco, San Jose and New York areas posted the lowest SFR property returns, the report said. Those with the lowest potential annual gross rental yields included San Mateo County, Calif. (3.4 percent); San Francisco County, Calif. (3.7 percent); Marin County, Calif. (4.0 percent); Santa Clara, Calif. (4.2 percent); and Kings County (Brooklyn), N.Y. (4.3 percent).

ATTOM also identified 98 "SFR Growth" counties where average wages grew over the past year and with potential 2019 annual gross rental yields of 10 percent or higher. These potential growth markets included Wayne County (Detroit), Mich.; Cuyahoga County (Cleveland), Ohio; Allegheny County (Pittsburgh), Pa.; Milwaukee County, Wis. and Marion County (Indianapolis), Ind.

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