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RealtyTrac has released a Buy-to-Rent analysis and a Buy-or-Rent analysis on three-bedroom residential properties in 285 counties nationwide. The Buy-to-Rent analysis found that potential returns from buy-to-rent purchases of three-bedroom residential properties in the first five months of 2015 decreased from the same time period a year ago in 169 of the 285 counties analyzed (59 percent).
Across all 285 counties analyzed, the average potential annual gross rental yield was 8.94 percent for three-bedroom residential properties purchased in the first five months of 2015, down from a 9.07 percent potential average potential rental return for three-bedroom residential properties purchased in the same time period a year ago in those same counties.
“As home price appreciation moderates and aligns more closely with trends in rental rates, the returns in the buy-to-rent market are stabilizing and becoming more predictable—if not as lucrative as they were for investors who purchased a few years ago near the bottom of the market,” said Daren Blomquist, vice president at RealtyTrac. “Buying rentals continues to be a brilliant strategy that allows investors to hedge their bets in a real estate market shifting away from homeownership and toward a sharing economy.”
Average rental rates on three-bedroom properties increased three percent from a year ago across all 285 counties analyzed, while average home prices on three-bedroom properties increased four percent across those same counties.
Potential buy-to-rent returns still increased in 116 of the 285 counties analyzed (41 percent) thanks to rental rate growth outpacing home price growth in those counties. Major counties where potential buy-to-rent returns increased from a year ago included Orange County, California in the Los Angeles metro area, King County, Washington in the Seattle metro area, Santa Clara County, California in the San Jose metro area, Philadelphia County, Pennsylvania, and Suffolk County, New York on Long Island. Other major markets with year-over-year increases in potential buy-to-rent returns included counties in Cincinnati, Cleveland and Columbus in Ohio, Atlanta, Charlotte and Raleigh in North Carolina, Milwaukee, Jacksonville, Florida, Seattle and Denver.
Counties with the highest potential rental returns for three-bedroom properties purchased in the first five months of 2015 were Clayton County, Georgia in the Atlanta metro area (24.05 percent annual gross rental yield), Bay County, Michigan in the Bay City metro area (19.23 percent), Mahoning County, Ohio in the Youngstown metro area (19.04 percent), Bibb County, Ga. in the Macon metro area (18.11 percent), and Philadelphia County, Pennsylvania (17.67 percent).
There were 51 counties with a combined population of 18.5 million where potential buy-to-rent returns were 10 percent or higher and where average weekly wages in the fourth quarter of 2014 increased three percent or more from a year ago. These counties included Wayne County, Michigan in the Detroit metro area (15.50 percent annual gross rental yield), Cuyahoga County, Ohio in the Cleveland metro area (14.62 percent), Milwaukee County, Wis. (12.15 percent), Erie County, N.Y. in the Buffalo metro area, and Duval County, Florida in the Jacksonville metro area (13.39 percent).