Where SFR Investors Cash In

The single-family rental home market is consistently growing across the nation, according to HouseCanary, Inc. Rental Investment Index second quarter update.

Composed of nearly 20 million homes, the HCRI Index allows single-family rental home investors, lenders, and renters to keep track of the health of the single-family-for-lease market based on median Effective Gross Yields on national, state, and ZIP code levels.

Due to difficulties in benchmarking this market, the HCRI helps investors identify accurate information regarding this surprisingly growing rental market.

“The ability to know where to invest with this level of granularity has never been possible before, and it is going to revolutionize this market,” said Dave Garland, a single-family rental investor, and Partner at Second Century Ventures.

Effective Gross Yields were highest in the Midwest and the South, making states in these regions the top performers nationwide. Mississippi leads the states at 12.9 percent, followed by Indiana and Ohio.

However, according to HouseCanary, the most notable update this quarter is the difference in yields within the highest and lowest Metropolitan Statistical Areas (MSAs).

Rochester, New York earns the spot of the national leader in Effective Gross Yield with 17.2 percent. The following top MSAs include Memphis, Tennessee, Cleveland, Ohio, Buffalo-Cheektowaga-Niagara Falls, New York, and Birmingham-Hoover, Alabama. These cities with the highest percentage of yields all surpassed 12 percent effective yields on average, higher than any state last quarter.

The lower part of the list is filled with MSAs from California, six cities specifically, where housing prices continuously increase faster than the growth in rents. In fact, California cities make up the three lowest effective yields, all below 5 percent.

Overall, 28 of the top 50 MSAs in the country surpassed the nationwide average Effective Gross Yield of 8 percent this quarter.