Getting into the rental game can be lucrative, even for smaller investors, but competing with institutional firms and Wall Street players can make paydays hard to find. RealtyTrac and RentRange recently joined forces to find secret locations where rental yields for single-family homes are higher due to outlying factors like low unemployment in local economies and distressed properties are not as prevalent, which is what draws the big fish. A handful of the choicest locations on their list of 25 hidden gems include Wichita County, TX; Lubbock County, TX; Canadian County, OK; and Monroe County, NY. For more on this continue reading the following article from TheStreet.
Mom-and-pop real estate investors have been squeezed out of the housing market by big institutional investors who have been rapidly buying single-family homes and converting them into rentals.
The big investors have greater access to financing and routinely outbid smaller investors.
But there are several markets that the likes of BlackRock (BLK) and Colony Capital (CLNY) are overlooking.
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The big investors are active in locations where the proportion of distressed properties are high. But rental yields are also strong in areas where unemployment is low and the local economies are growing. Rents are increasing at a strong pace in these cities as homes for sale remain in short supply.
RealtyTrac and RentRange put together a list of "hidden gems" in the single-family rental market. The top 25 markets had the highest gross rental yields (determined by dividing the gross annual rental income by the purchase price or market value of the property) in counties where institutional investor participation was 5% or less of all residential sales in the three months ended in July and where the unemployment rate was 7.5% or lower.
The analysis was limited to single-family homes with three bedrooms.
"Buying single-family homes as rentals still yields solid returns in many markets across the nation, but it is difficult for individual investors and even small- to medium-sized institutional investors to find reasonably priced inventory in markets dominated by the 800-pound gorillas in the single family rental space," said Daren Blomquist, vice president at RealtyTrac. "With this analysis we’ve identified the top overlooked markets where single family rentals still make good financial sense but where there is little to no competition from the big players."
Wichita County in Texas topped the list, with gross rental yields topping 13%.
Here are the others that made the hidden gems list.