Single-Family Rental Homes See Diminishing Returns

The investment class performed well in certain Sunbelt counties but poorly in New York City and California, according to a new report by ATTOM Data Solutions.

Single-family rental home in Nashville. Image courtesy of Tricon Capital Group

Single-family homes have lost some of their luster as an investment class, with rental returns decreasing year-over-year in 59 percent of the 389 counties analyzed in a recent market report. The average annual gross rental yield among all the counties is 8.4 percent for 2020, easing downward from the 8.6 percent average in 2019, the analysis by ATTOM Data Solutions finds.

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The Q1 2020 market report harnesses rental data from the U.S. Department of Housing and Urban Development as well as home price data collected by ATTOM to create a picture of which counties are the most attractive for investors in the emerging asset class. Out of the 389 counties with populations of at least 100,000, three of the top five performers in terms of potential annual gross rental yields for 2020 were located in the Sunbelt states of Georgia and Alabama:

  • Baltimore City/County: 28.9 percent
  • Cumberland County (Vineland-Bridgeton, N.J., metro area): 20.1 percent
  • Bibb County (Macon, Ga., metro area): 18.2 percent
  • Mobile County (Mobile, Ala., metro area): 15.7 percent
  • Clayton County (Atlanta metro area): 15.1 percent

Among counties with at least one million residents, the highest yields were claimed by Wayne County (Detroit, Mich.); Cuyahoga County (Cleveland); Cook County, Ill.; Dallas County, Texas; and Harris County, Texas.

Coastal losers

On the other hand, the lowest potential yields for all counties were found in California, New York, and Nashville, Tenn.:

  • San Francisco County: 3.8 percent
  • San Mateo County, Calif.: 3.8 percent
  • Williamson County (Nashville metro area): 3.9 percent
  • Kings County (Brooklyn, New York): 4.3 percent
  • Santa Clara County, Calif.: 4.3 percent

For counties with populations of at least one million, Queens County, N.Y., Orange County, Calif., and Los Angeles County joined Kings County and Santa Clara County on the five worst-performing markets list.

Fortunately for would-be renters, wages rose faster than rents in 53 percent of the counties analyzed in 2019, including Seattle’s Kings County; while Los Angeles County was among the markets where rent growth surpassed wage increases.

Home prices rose faster than wages in 61 percent of the markets covered, while prices rose faster than rents in 59 percent of the counties, according to the report by the property data provider.

The average annual gross rental yield is calculated by dividing the annualized gross rent income by the median purchase price of single-family homes.

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