HomeUnion: Best And Worst U.S. Markets For SFR Investments

Posted by Patrick Barnard on February 23, 2016 No Comments
Categories : Residential Mortgage

HomeUnion, an online real estate investment management firm, has released a ranking of the most and least favorable single-family rental (SFR) markets measured by cap rate.

Memphis has the most favorable cap rate, topping the list at 7.3%, while the least favorable market in the study is San Francisco, at 2.7%.

“Other asset classes underperformed in 2015, while single-family rental investors saw healthy returns in terms of income and appreciation in markets across the country,” says Steve Hovland, manager in research services for HomeUnion. “Favorable supply and demand fundamentals and shifting views about renting among millennials and seniors created increased occupancy rates, which resulted in higher rent prices.”

Based on cap rates, the top 10 SFR investment markets are as follows:

  • Memphis, Tenn. — 7.3%
  • Oklahoma City — 6.9%
  • Pittsburgh — 6.4%
  • Cincinnati — 6.4%
  • Houston — 6.1%
  • Indianapolis — 6.0%
  • Cleveland — 5.9%
  • Baltimore — 5.9%
  • Milwaukee — 5.9%
  • Tampa, Fla. — 5.9%

The bottom (least attractive listed first) 10 SFR investment markets are as follows:

  • San Francisco — 2.7%
  • San Jose, Calif. — 2.7%
  • Orange County, Calif. — 3.0%
  • Los Angeles — 3.2%
  • New York — 3.5%
  • Seattle — 3.5%
  • Oakland, Calif. — 3.5%
  • San Diego — 3.6%
  • Sacramento, Calif. — 3.6%
  • Portland, Ore. — 3.9%

“With continued turmoil in the securities markets, individual investors are increasingly looking to an alternative to low-yield bonds and risky stocks,” says Don Ganguly, CEO of HomeUnion. “The SFR market is not correlated to the securities market, and with the right research, investors can find high-yield investments in markets anchored by solid, diverse economies and favorable demographics.”

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