When it comes to purchasing single-family rental homes, the magic number is 30238—which is the ZIP Code for the market where buyers of these properties see the greatest potential in rental yields and cash flows.
According to a report from ATTOM Data Solutions
, the rental markets in 4,854 ZIP Codes and 439 counties with sufficient rental and home price data were studied for their financial yields, vacancy rates and tax and maintenance costs. Among the top 25 ZIP Codes with the strongest potential annual gross rental yield—defined as annualized gross rent income divided by median purchase price for single family homes—during the third quarter were 30238 in the Atlanta metro area (17.7 percent); 77373 in the Houston metro area (13.5 percent); 34472 in the Ocala, Fla., metro area (13.1 percent); 76140 in the Dallas-Fort Worth metro area (12.7 percent); and 30228 in the Atlanta metro area (12.6 percent).
Daren Blomquist, Senior Vice President at ATTOM Data Solutions, noted these markets were “located in neighborhoods with relatively low vacancy rates and with home price growth and population growth—which should continue to put upward pressure on rental rates.”
As for who is purchasing these properties, institutional investors accounted for 2.9 percent of all single-family home sales in the third quarter, up from 2.3 percent in the previous quarter but down from 3.1 percent one year earlier. However, the institutional investor share of single family home purchases increased from a year ago in 136 of the 439 counties (31 percent) and in 1,804 of the 4,854 zip codes (37 percent) analyzed in the report. And at the other end of the spectrum, the lowest potential rental property returns were in coastal metro areas with pricey housing markets, led by ZIP Codes in the Miami, Los Angeles, Santa Barbara, New York and San Jose localities.