Here Are The Best Markets:

HomeUnion, an online real estate investment management firm enabling value investing in single-family rental (SFR) properties, announced today a ranking of the most and least favorable SFR markets measured by cap rate. Memphis tops the list with a cap rate of 7.3%, while the lowest cap rate in the study is San Francisco, at 2.7%.

Cap rates are the relationship between an investment property’s net operating income (rents minus expenses) and the market value of the property.

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“Other asset classes underperformed in 2015, while single-family rental investors saw healthy returns in terms of income and appreciation in markets across the country,” explained Steve Hovland, manager, research services at HomeUnion. “Favorable supply and demand fundamentals and shifting views about renting among millennials and seniors, created increased occupancy rates, which resulted in higher rent prices.”

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Based on cap rates, the top 10 SFR investment markets are:

Metro Area Cap Rate
Memphis 7.3%
Oklahoma City 6.9%
Pittsburgh 6.4%
Cincinnati 6.4%
Houston 6.1%
Indy 6.0%
Cleveland 5.9%
Baltimore 5.9%
Milwaukee 5.9%
Tampa 5.9%

Based on cap rates, the bottom (least attractive listed first) 10 SFR investment markets are:

Metro Area Cap Rate
San Francisco 2.7%
San Jose 2.7%
Orange County, CA 3.0%
Los Angeles 3.2%
New York, NY 3.5%
Seattle 3.5%
Oakland 3.5%
San Diego 3.6%
Sacramento 3.6%
Portland 3.9%

“With continued turmoil in the securities markets, individual investors are increasingly looking to an alternative to low-yield bonds and risky stocks,” explained Don Ganguly, CEO of HomeUnion. “The SFR market is not correlated to the securities market, and with the right research, investors can find high-yield investments in markets anchored by solid, diverse economies and favorable demographics.”

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