Rental market intelligence provider RentRange recently ranked the top 25 U.S. MSAs (metropolitan statistical areas) for single-family home rental price gains and best investment yields. The results were surprising for some, and a cautionary tale for others.
But in Houston, one of two Lone Star state cities on the list, last place on the list doesn’t necessarily mean that things are dire. In fact, it’s just the opposite for those who are investing in homes to rent out.
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The RentRange reports uses a wealth of numbers that the company has cataloged, crunched and supplied to customers since 2011. This new report tracks data for the third quarter of 2015 and the same quarter in 2014 in it’s new report.
In that time period, rents in Houston climbed 9.6 percent.
California and Florida cities dominate the top 10 spots in the rankings for rental increases, and hold a dozen of the spots on the overall list.
But even though Houston is last on the list, it comes in second-best in yield, with 14 percent.
The other Texas metro on the list, Dallas/Fort Worth, is at 13.4 percent. The top metro for average yield is Birmingham, Alabama, at 14.8 percent. And, it is that metric which RentRange CEO Walter Chernoff points out is a critical number for investors.
“Home prices are going up,” said Charnoff, “so the yield is a less impressive number than the rent price increase.”
He says that his company’s data show that there is still great opportunity in real estate investing, but points out that to achieve desired yield on those investment results, investors need to be more informed before buying and rehabilitating investment property.
Although the California and Florida markets are showing the biggest gains in monthly rents, yield gains are much more moderate. For example, the top metro on the list, Cape Coral, Florida, shows a 23.6 percent change in rent, yet a 9.1 percent average yield. The markets in those two states, Chernoff said, are in the process of normalizing, and that includes rental properties that may have been let out at rents below what they could realize.
RentRange gathers rental data on approximately 250,000 single-family homes each month from a variety of sources, including multiple listing services, property managers, landlords and listing web sites. The yield are figures are calculated RentRange’s proprietary automated valuation model.
Charnoff says that RentRange’s unique and clean data sets allow them to produce the most accurate data. He says the release of the information has created conversation among professionals in the real estate field.
“Other data sources commingle multi- and single-family rentals,” Charnoff said. “RentRange has enough data so that we can separate the two, and can track the single family segment because of how much data we have available.”
RentRange provides Rental Market Intelligence to the financial services and real estate industries. The company was acquired by Altisource Portfolio Solutions in October.
