The rental market has been booming over the past several years, with many landlords earning returns of 10% or better.
While rising home prices have limited returns for landlords in some markets, other markets offer plenty of profits, according to RealtyTrac which analyzed rental market conditions in 370 major U.S. counties, including median home prices, average rents and unemployment rates.
For example, landlords in Anderson County, S.C., can rent a three-bedroom home with a median price of $70,000 for $900 a month. With average returns of 15.3% — that’s well above the national average of 10%.
Home to a university and several auto parts makers for BMW, Anderson is part of the Greeneville metro area and has a low 4.3% unemployment rate, meaning demand should continue to strengthen and help add to future profits.
Other areas that offer landlords more bang for their buck include Woodbury County, Iowa. Median home prices in the area, which includes the Sioux City metro area, were a low $84,250 while rents averaged $914 a month. That translates into a rental return of about 13% for landlords.
While low unemployment is one factor landlords should look for while assessing a market, RealtyTrac also suggested that investors take the demographics of an area into account as well, particularly when it comes to baby boomers and millennials.
Markets where these populations are growing rapidly should produce strong returns for investors going forward. For boomers, who were born between 1945 and 1964, retirement-friendly markets in Florida are predictably hot. Some local markets have seen their boomer populations grow by 20% or more since 2007.
The Tampa-St. Petersburg-Clearwater, Fla. metro area topped the list among markets for boomers.
Millennial markets, on the other hand, were scattered throughout the nation. RealtyTrac cited the Baltimore, Philadelphia, Jacksonville, Fla. and Atlanta metro areas as leading rental markets for this age group.
Several smaller markets are also good Millennial bets such as Fayetteville, N.C. and Virginia Beach/Newport News City, Va.
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