The Best Market for Investment Housing Is …

When it comes to the markets offering investors the highest yields single-family rental (SFR) properties, the unlikely leader is Cleveland.

According to new data from HomeUnion, Cleveland leads the nation, with first-year yields of 10.9 percent for investment housing. Other hot SFR markets for investors include Columbia, S.C. (9.3 percent yield), Memphis (8.5 percent yield), Philadelphia (7.9 percent yield) and Atlanta (7.6 percent).

At the other end of the spectrum, California’s Orange County three percent yield is the lowest for SFR investors. Some of the nation’s most expensive housing markets have the flabbiest yields: San Jose (3.1 percent), San Francisco (3.2 percent), Los Angeles (3.5 percent), Seattle (3.6 percent), Denver (4.2 percent) and Portland (4.3 percent).

“Strictly based on yields, and not accounting for employment growth and future rental demand, Cleveland, Columbia, S.C., and Memphis top our list of SFR markets for returns,” said Steve Hovland, director of research for HomeUnion. “In these metros, investors stand to gain big with a small initial investment over a shorter-term horizon. On the other hand, Orange County, San Jose and San Francisco will provide SFR buyers with the lowest yields on their investments. At this stage in the real estate cycle, investing in these West Coast markets doesn’t pencil out for most buyers, unless they seek a long-term appreciation play or desire the cache associated with purchasing California properties located in highly ranked school districts.”