The best places to invest in rental property

Dennis Norman, St Louis REALTORLas Vegas, Nevada is the best place in America to buy at rental property at this time according to the newly released “HomeVestors-Local Market Monitor Best Markets to Invest in Rental Property” report. St. Louis came in at number 50 and Kansas City at number 37.

According to the report, approximately 14 percent of the single family homes in the U.S. are being operated as rental properties. The report ranks locations based upon the “expected future performance of homes maintained as rental properties.” The report focuses on single-family homes maintained as rentals and not condominiums or multi-family’s. The ranking is based on three-year forecasts of home prices (this is pretty much a wild card in this market) and the gross rents resulting in a risk-return premium which is then compared with the national average. For the 3rd quarter of 2011, the national average risk-return premium was 5.4 percent. The rates shown below represent how much above the national average that city is.

HomeVestors-Local Market Monitor Best Markets to Invest in
Rental Property – Top 20 Markets
Market Q3
Since Q2
Risk-Return Premium (+/-)
Relative to 5.4% National Average
Las Vegas, Nevada 1 1 NA +5.0% (above national average)
Detroit, Michigan 2 2 NA +4.3%
Orlando, Florida 3 4 +1 +3.1%
Warren, Michigan 4 3 -1 +3.1%
Ft. Lauderdale, Florida 5 8 +3 +2.9%
Bakersfield, California 6 5 -1 +2.7%
Tampa-St. Petersburg, Fla. 7 6 -1 +2.6%
Phoenix, Arizona 8 7 -1 +2.5%
Stockton, California 9 10 +1 +2.4%
West Palm Beach, Florida 10 18 +8 +2.2%
Atlanta, Georgia 11 16 +5 +2.1%
Bradenton-Sarasota, Florida 12 11 -1 +2.1%
Rochester, New York 13 9 -4 +2.0%
Fort Worth, Texas 14 12 -2 +1.9%
Dallas, Texas 15 13 -2 +1.8%
Syracuse, New York 16 14 -2 +1.7%
Jacksonville, Florida 17 20 +3 +1.7%
Fresno, California 18 17 -1 +1.5%
Tucson, Arizona 19 21 +2 +1.5%
Memphis, Tennessee 20 27 +7 +1.4%

Source: HomeVestors-Local Market Monitor

Commenting on the local markets and the ranking overall, Ingo Winzer, president and founder of Local Market Monitor, Inc., said:

“A sharper than expected fall in recent home prices, which are down almost 5% in the last year, has led us to lower expectations for future prices. At the same time, however, higher inflation and slow but steady job growth should boost future rents. The desirability of investing in rental properties is therefore positive. In fact, the national average risk-return premium has ticked up ever so slightly from 5.3% to 5.4% since last quarter.”

“The Future Relative Returns for large markets suggest that Las Vegas and Detroit are still very risky, highly speculative markets that could have a big payoff only if the local economy rebounds faster than we expect. Safer but still advantageous markets include Dallas, Fort Worth and Atlanta. The most interesting markets are in Florida and Arizona, where home prices have still not bottomed out but rents will eventually be supported by renewed population growth; investors in these markets must take a long-term view but will be rewarded if they can tolerate high vacancies for a few years.”

David Hicks, co-president of HomeVestors of America, Inc., added: “What we’re seeing in the marketplace reinforces the results of the latest ranking. Our franchises in West Palm Beach, Atlanta, Phoenix, Dallas, Fort Worth and Tucson all report a marked increase in investor interest in rental property opportunities. Investors are recognizing the potential for homes in these markets to produce above-average financial returns.”

HomeVestors-Local Market Monitor Best Markets to Invest in
Rental Property – Top 100 Markets
Rank Market Risk-Return Premium (+/-) Relative
to 5.4% National Average
1 Las Vegas, Nevada +5.0% (above national average)
2 Detroit, Michigan +4.3%
3 Orlando, Florida +3.1%
4 Warren, Michigan +3.1%
5 Ft. Lauderdale, Florida +2.9%
6 Bakersfield, California +2.7%
7 Tampa-St. Petersburg, Florida +2.6%
8 Phoenix, Arizona +2.5%
9 Stockton, California +2.4%
10 West Palm Beach, Florida +2.2%
11 Atlanta, Georgia +2.1%
12 Bradenton-Sarasota, Florida +2.1%
13 Rochester, New York +2.0%
14 Fort Worth, Texas +1.9%
15 Dallas, Texas +1.8%
16 Syracuse, New York +1.7%
17 Jacksonville, Florida +1.7%
18 Fresno, California +1.5%
19 Tucson, Arizona +1.5%
20 Memphis, Tennessee +1.4%
21 Wichita, Kansas +1.4%
22 Riverside-San Bernardino, California +1.3%
23 Grand Rapids, Michigan +1.3%
24 Miami, Florida +1.3%
25 Dayton, Ohio +1.3%
26 Omaha, Nebraska +1.2%
27 Houston, Texas +1.2%
28 Sacramento, California +1.2%
29 Tulsa, Oklahoma +1.1%
30 Akron, Ohio +1.0%
31 El Paso, Texas +1.0%
32 Minneapolis-St. Paul, Minnesota +1.0%
33 Austin, Texas +1.0%
34 Cleveland, Ohio +1.0%
35 Toledo, Ohio +0.9%
36 Colorado Springs, Colorado +0.8%
37 Kansas City, Missouri +0.8%
38 Oklahoma City, Oklahoma +0.8%
39 San Antonio, Texas +0.7%
40 Buffalo, New York +0.7%
41 Gary, Indiana +0.7%
42 Camden, New Jersey +0.6%
43 Columbia, South Carolina +0.6%
44 Little Rock, Arkansas +0.6%
45 New Haven, Connecticut +0.6%
46 Edison, New Jersey +0.5%
47 Columbus, Ohio +0.5%
48 McAllen, Texas +0.5%
49 Chicago, Illinois +0.4%
50 St. Louis, Missouri +0.4%
51 Albuquerque, New Mexico +0.3%
52 Richmond, Virginia +0.3%
53 Indianapolis, Indiana +0.3%
54 Poughkeepsie, New York +0.3%
55 Tacoma, Washington +0.2%
56 Cincinnati, Ohio +0.2%
57 Wilmington, Delaware +0.2%
58 Denver, Colorado +0.2%
59 Nashville, Tennessee +0.2%
60 Greensboro, North Carolina +0.2%
61 Albany, New York +0.2%
62 Portland, Oregon +0.2%
63 Allentown, Pennsylvania +0.1%
64 Hartford, Connecticut +0.1%
65 Pittsburgh, Pennsylvania +0.1%
66 Baton Rouge, Louisiana +0.1%
67 Raleigh, North Carolina 0.0% (equivalent to national average of 5.4%)
68 Charlotte, North Carolina 0.0% (equivalent to national average of 5.4%)
69 Springfield, Massachusetts -0.1% (below national average)
70 Bridgeport, Connecticut -0.1%
71 Virginia Beach, Virginia -0.1%
72 Knoxville, Tennessee -0.2%
73 Louisville, Kentucky -0.2%
74 Birmingham, Alabama -0.2%
75 Washington, DC -0.2%
76 Philadelphia, Pennsylvania -0.2%
77 Milwaukee, Wisconsin -0.2%
78 New Orleans, Louisiana -0.2%
79 Seattle, Washington -0.3%
80 Salt Lake City, Utah -0.4%
81 Baltimore, Maryland -0.4%
82 San Diego, California -0.4%
83 Oxnard, California -0.5%
84 Boston, Massachusetts -0.6%
85 Greenville, South Carolina -0.6%
86 Worcester, Massachusetts -0.6%
87 Charleston, South Carolina -0.7%
88 Oakland, California -0.7%
89 Lake County, Illinois -0.8%
90 Providence, Rhode Island -1.0%
91 Nassau-Suffolk, New York -1.0%
92 Anaheim, California -1.2%
93 Los Angeles, California -1.3%
94 Peabody, Massachusetts -1.4%
95 San Jose, California -1.5%
96 Honolulu, Hawaii -1.5%
97 Newark, New Jersey -1.6%
98 Bethesda, Maryland -1.7%
99 New York City, New York -1.9%
100 San Francisco, California -2.4%

Source: HomeVestors-Local Market Monitor

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