The average annual gross rental yield was 8.9 percent for 2018, down from an average of 9.2 percent in 2017, according to ATTOM Data Solutions.
ATTOM’s Q1 2018 Single Family Rental Market report analyzed single family rental returns in 449 U.S. counties each with a population of at least 100,000.
“Despite declining returns in many areas, the single-family rental market continues to grow thanks to more activity by smaller and middle-tier investors,” ATTOM Data Solutions Senior Vice President Daren Blomquist said in a release.
“The biggest increase in market share over the past year has come among investors owning six to 10 single family rentals, followed by those owning between 11 and 100 rentals,” Blomquist added. “These smaller to mid-tier investors are benefitting from newfound efficiencies in acquisition, financing and property management that allow them to buy outside their backyard in areas with higher potential returns, and to leverage their money to buy more properties.”
According to ATTOM, the areas with the highest potential annual gross rental yields for 2018 were Baltimore (28.6 percent); Bibb County, Ga. (21.8 percent); Montgomery County, Ala. (21.7 percent); Wayne County, Mich. (21.7 percent); and Clayton County, Ga. (20.3 percent).
“With continued job growth in Cleveland and Atlanta, Divvy is seeing a significant year-over-year increase in the percent of highly-qualified single-family renters, who are often less than two years away from mortgage qualification,” Divvy Homes Co-founder Tiffany Li said. “This population is seeking SFRs in neighborhoods that are largely owner-occupied and with family-friendly amenities and good schools. We’ve continued to see strong and growing demand through the Midwest and Southeast for lease options and other unconventional rental options that allow highly-qualified renters to move towards homeownership.”
ATTOM said the highest potential annual gross rental yields among counties with a population of at least 1 million were Cuyahoga County (Cleveland), Ohio (11.6 percent); Philadelphia County, Pa. (10.0 percent); Cook County (Chicago), Ill. (9.5 percent); and Harris County (Houston), Texas (9.5 percent).
Rental returns increase year-over year in one third of the counties ATTOM analyzed. The increases were the largest in Rowan County, N.C. (up 36 percent); Randolph County, N.C.(up 32 percent); Tazewell County, Ill. (up 21 percent); Baltimore (up 21 percent); and Kings County, Calif. (up 20 percent).
ATTOM identified the counties with the lowest potential annual gross rental yields for 2018 as Arlington, Va. (3.6 percent); Santa Clara County, Calif. (3.6 percent); San Mateo County, Calif. (3.7 percent); Williamson County, Tenn. (4 percent); and Kings County (Brooklyn), N.Y. (4.0 percent).
The report said rents are rising faster than wages in 84 percent of the markets it analyzed.