Posted July 09, 2014 by RentJungle

A new report from RealtyTrac was recently published detailing the effects of rising home prices on investor returns for rental properties. Interested to see which cities have the best annual ROI rates? Check the list towards the end of the article!


RealtyTrac has published its latest report on rental rates in the broader U.S. market, and while there are some trends that speculative investors may find troubling, the rental real estate market is still providing quite healthy returns in most metro areas. The Q2 2014 U.S. Residential Rental Property report covers 370 U.S. counties that represent approximately 186 million U.S. residents - making it one of the most often used reports to gauge the overall health and geographic trends in the U.S. rental property market.


A continued trend of rising prices for new and existing homes has put a slight drag on the potential for investor returns, with current nationwide average annual yields hovering around 9.97 percent, down from 10.6 percent a year ago. For those investors who already have an established portfolio of rental properties, the nearly 10% annual yield is respectable, and the 7% rise in the median price for existing homes provide additional comfort.


Part of the larger trend is due to the relative scarcity of new apartment construction projects, which is leading to a shortage in supply of available rental units. New and more restrictive mortgage qualification guidelines are resulting in the disqualification of many first time homebuyers, which places an additional demand on the rental market for housing.


Investors who have made it a practice to monitor demographic patterns and geographic shifts in the rental market should continue to enjoy higher than average annual returns. The two main demographic groups that real estate investors should be focusing on are the baby boomers and the millennials; both of which are going through transitionary life stages where decisions to rent are often advantageous. Together, these two demographic groups account for more than 60 percent of the U.S. adult population.


Location is always an important factor in buying, renting, or investing in real estate. For the investor, areas with vibrant economies and low unemployment signify great potential. Quite naturally, yields in these areas were high in the Q2 report, with Anderson, SC topping the list with an average annual return of 15.33 percent. The top 10 areas for those looking to buy rental property are:

1. Anderson, SC 15.33%

2. Woodbury Cty, IA 13.02%

3. Pickens Cty, SC 13.00%

4. Alachua Cty, FL 12.02%

5. Spotsylvania Cty, VA 11.86%

6. Lexington Cty, SC 11.26%

7. Allegheny Cty, PA 11.25%

8. Franklin Cty, OH 9.97%

9. Dorchester Cty, SC 9.95%

10. Douglas Cty, NE 9.93%


Check out the RealtyTrac report for further insights into the hottest markets for the baby boom generation and for millennials:

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