Study cites best areas for boomer, millennial rents
IRVINE, Calif. – July 3, 2014 – RealtyTrac's Q2 2014 Residential Property Rental Report ranks the best markets for buying residential rental properties, and it focused on the top investment areas for baby boomer and millennial renter demand.
For the report, RealtyTrac analyzed median sales prices for residential property and average fair market rents for three bedroom properties in 370 U.S. counties – an area that included 60 percent of the total U.S. population. Rental returns were calculated using annual gross rental yields: the average fair market rent of three-bedroom homes in the county, annualized, and divided by the median sales price of residential properties in the county.
The analysis found that investors buying U.S. residential rental property in the second quarter of 2014 are getting an average annual return of 9.97 percent, down from an average annual return of 10.60 percent a year ago.
Overall, Florida dominated the market for baby boomer rentals. North Carolina and Arizona each had two counties on the list, while the remaining states only had one.
Median home prices increased more than 7 percent on average in the second quarter of 2014 compared to a year earlier, while average fair market rents for three-bedroom homes increased an average of less than 1 percent.
"Home prices have increased at a faster pace than fair market rents in most counties over the past year, eroding the average returns available to investors buying rental properties," says Daren Blomquist, vice president at RealtyTrac. "Even so, an average annual return of nearly 10 percent across all the counties we analyzed nationwide is still solid, and investors holding on to rental property for the long term will also typically benefit from home price appreciation on top of the annual returns from rental income.
Top Florida markets for renting to baby boomers
1. Pasco County: 27% of residents are boomers; 11.7% six-year increase
2. Hernando County: 28.6% of residents are boomers; 24.7% six-year increase
3. Marion County: 28.2% of residents are boomers; 24.8% six-year increase
4. Citrus County: 32.1% of residents are boomers; 28% six-year increase
5. Polk County: 24.9% of residents are boomers; 13.3% six-year increase
6. Brevard County: 29.8% of residents are boomers; 10.7% six-year increase
7. St. Lucie County: 26.6% of residents are boomers; 23.5% six-year increase
8. Volusia County: 29.1% of residents are boomers; 11.8% six-year increase
9. Charlotte County: 32.9% of residents are boomers; 34.3% six-year increase
10. Lake County: 27% of residents are boomers; 26.5% six-year increase
13. Manatee County: 28% of residents are boomers; 20.8% six-year increase
14. Sarasota County: 30.4% of residents are boomers; 23.2% six-year increase
15. Indian River County: 29% of residents are boomers; 24.8% six-year increase
16. Martin County: 29.5% of residents are boomers; 20.4% six-year increase
17. Collier County: 28.1% of residents are boomers; 27.6% six-year increase
21. Collier County: 26.8% of residents are boomers; 24.3% six-year increase
"Investors leveraging demographic trends will often be able to amplify rental returns and home price appreciation, particularly when it comes to trends in the baby boomer and millennial generations, which combined account for approximately 147 million people – more than 60 percent of the U.S. adult population," Blomquist says. "Many individuals in both of those demographic groups are in the midst of major life changes that will often involve changes in housing, something that smart real estate investors should take into consideration when deciding when and where to buy or sell."
Top Florida markets for renting to millennials
3. Duval County: 24.7% of residents are millennials; 19.2% six-year increase
7. Hillsborough County: 24% of residents are millennials; 16.7% six-year increase
10. Osceola County: 24.5% of residents are millennials; 12.9% six-year increase
13. Orange County: 27.7% of residents are millennials; 30.3% six-year increase
Top overall Florida markets for real estate rental investing
4. Alachua County: Gross rental yield: 12.02%
© 2014 Florida Realtors®