Digested from an article written by Phil Hall in the October 20, 2016 National Mortgage Professional Magazine.
Single Family Investment Property Returns
According to data on single family investment returns compiled by ATTOM Data Solutions, the average annual gross rental yield—monthly rent, annualized, divided by median home price—was 8.7 percent for single family properties purchased in the first seven months of this year are down from an average of 8.8 percent for the same time period in 2015. This year’s numbers were the lowest level recorded since 2007, when the average gross rental yield was 7.3 percent across the 473 cities analyzed for this survey.
ATTOM Data Solutions also found that 2.7 percent of all single-family homes that sold in the first seven months of 2016 were purchased by institutional investors, up from a 2.1 percent share during the same period last year. However, 68 percent of the counties analyzed for this study reported year-over-year increases in the share of institutional investor purchases.
“While average rental returns on properties purchased so far in 2016 are at a nine-year low, these returns are still attractive compared to alternative investing opportunities,” said Daren Blomquist, senior vice president at ATTOM Data Solutions. “After a drop-off in single family purchases by both individual and institutional investors over the past two years, we’re starting to see investor acquisition activity pick up again. Given shifting attitudes toward homeownership that are showing up in stubbornly low homeownership rates and our data showing more than 18 million non-owner occupied single family homes—one in every four single family homes—these single family rental investors will be an important and likely growing force in the real estate market for years to come.”