So You’re Thinking About Becoming A Landlord
Over the past few years the rental market has been booming. We can thank the slowly recovering economy and the previous recession for creating a large pool of renters that need quality homes. If you’re thinking of becoming a landlord and purchasing passive income property there are several places across the U.S. that can give you above average returns on your investment. Most returns are well above the interest rates the banks are giving savers and that has enticed several new investors to take the leap and enter the rental market.
Even though rising home prices have dampened the return on investment in some markets, other markets continue to offer plenty of profits, according to RealtyTrac which analyzed rental market data and conditions in 370 major U.S. counties, including median home prices, average rents and unemployment rates. Choosing the location to invest in rental property can be paramount to the success of your investment. Most new investors will want to stay close to their current homes. This can be beneficial for several reasons but can also limit your profit. There are several areas of the U.S. that have proven to show above average returns. Remember that every property is different and it’s up to the individual investor to make smart investment decisions. With that said, the following locations have been producing great returns for investors.
According to RealtyTrac, landlords in Anderson County, S.C., for example, who rent out a median priced three-bedroom home would average returns of 15.3%. That’s well above the national average of a 10% return. The reason for the jump in returns is because homes here are cheap to purchase with median prices of less than $70,000, while rents are high, averaging $900 a month. If you do decide to invest out of state choose areas similar to Anderson County that have a low unemployment rate. You may find a great deal on a house but if you can’t find anyone who will pay the rent is that really a wise investment?
Other areas of the country that have shown to offer landlords more bang for their buck include Woodbury County, Iowa, with median home prices in the $84,250 range. With rents averaging $914 a month that translates into a 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 several other pieces of data into consideration. Such as the demographics of an area, particularly when it comes to baby boomers and millennials.
Markets with higher populations of baby boomers and millennials have shown to be areas that are experiencing lots of growth. That translates into a greater need for housing and more potential renters for your properties.
For baby boomers who were born between 1945 and 1964, there are several retirement-friendly markets in Florida that have become great places for landlords to invest. According to RealtyTrac some local markets have seen their baby boomer populations grow by 20% or more since 2007. The Tampa-St. Petersburg-Clearwater, Fla. metro area topped the list among markets where baby boomers were renting.
On the other hand, areas where millennials were flocking to are more scattered throughout the nation. RealtyTrac cited the cities of Baltimore, Philadelphia, Jacksonville, Fla. and Atlanta as metro areas leading rental markets for this age group.
There are several other smaller markets across the country with properties that will make great rentals. Always remember to do your research and gather as much data as possible before committing to a new area.