CNBC - Diana Olick - 08 February 2017
Home prices continue to climb in already-expensive Seattle, but investors with enough cash to get into the city's landlord business could see big returns.
Seattle ranked in the Top 3 of the nation's best markets for rental real estate investors, according to an "opportunity" list from HomeUnion, a single-family-rental acquisition and management company.
Despite its high home prices, Seattle is seeing increasing demand for rental dwellings because of robust job growth in the area. Amazon alone recently announced it was hiring 100,000 new employees, and while they won't all work in Seattle, the corporate headquarters will need to grow for support. New jobs mean stronger demand for rental housing.
The story is much the same in Atlanta, which topped HomeUnion's list as the best opportunity for single-family-rental investors. Both the Falcons and the Braves are building new stadiums in Atlanta, which will create an estimated 75,000 jobs for the city. Plus, home prices in Atlanta have not yet recovered as well as those in other markets, so investors can get in more easily and reap higher rents because of the increased demand.
"Atlanta has moved up the list. They were late to the [recovery] party and are now seeing 3.5 percent rent growth" said Steve Hovland, director of research at HomeUnion. "They're also having a big decrease in single-family-rental vacancies."
Like Atlanta, Orlando, Florida, which came in at No. 2 on the list, is seeing an influx of retirees looking for warm climates. Orlando has both supply and demand, making entry prices for investors attractive. As the home of Walt Disney World and scores of other attractions, Orlando has set new tourism records, also boding well for its rental market.
"That will create thousands of leisure and hospitality jobs, which are lower paying, so they preclude home ownership," Hovland said.
While Atlanta topped the list because of its low entry price and high job growth, other markets made the Top 10 despite their cooler employment prospects. Detroit, Memphis, Tennessee, and Chicagohave relatively low home prices when compared with asking rents, making them lucrative for investors. While there has been considerable apartment construction in Chicago and other markets on the list, most of that has been on the luxury end and doesn't compete directly with single-family rentals.
Previously hot rental markets, like San Francisco and San Jose, California, have cooled for investors because new apartments compete more directly with those high-priced homes. With more apartment supply, rents are coming down, along with potential investor returns.
HomeUnion "opportunity" ranking, by metro area
4. Las Vegas
6. San Diego
7. Oakland, Calif.
9. Dallas-Fort Worth