Markets & EconomyRentals

Single-family rentals less profitable in costliest markets

Rising home values and low wage growth in Brooklyn, San Francisco, DC hindering single-family rental returns
  • Some of the nation’s most expensive for-sale markets trail the national average in single family rental returns.
  • Home values outpace rents in 55 percent of the markets analyzed, which generally indicates a lagging rental market as compared to homeownership, yet wage growth surpasses rents in 43 percent of markets.

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Rapidly rising home values combined with low national wage growth is thwarting profitability on single-family investment properties in markets like San Francisco, New York City and D.C. Some of the nation’s most expensive for-sale markets trail the national average in single family rental returns, according to RealtyTrac’s first-quarter single-family rental market investing report. Across the U.S., investors gross an average 9.4 percent rental revenue -- a drop from 9.5 percent in the first quarter of 2015. Home values outpace rents in 55 percent of the markets analyzed, which generally indicates a lagging rental market as compared to homeownership, yet wage growth surpasses rents in 43 percent of markets. RealtyTrac senior vice president Daren Blomquist suggests wage increases gives potential for yields on single-family investments down the road. “More important than rent growth, although that does indicate demand, the key to me is wage growth. If you have the ...