Wichita County, Texas, Named Top ‘Hidden Gem’ Single-Family Rental Market

Institutional investors who have been acquiring single-family properties and converting them into rental units have been flocking to many of the same cities, but there are still markets where the competition for these types of assets remains low.

A report released by RealtyTrac and RentRange listed the top 25 hidden gem single-family rental markets by evaluating gross rental yield, institutional investor sales numbers before accounting for taxes, maintenance fees and other costs, and unemployment figures for more than 450 counties nationwide with populations of 100,000 or more. The analysis was limited to single-family homes with three bedrooms.

Gross rental yield is determined by dividing gross annual rental income by the purchase price or market value of the property.

“Buying single-family homes as rentals still yields solid returns in many markets across the nation, but it is difficult for individual investors and even small- to medium-sized institutional investors to find reasonably priced inventory in markets dominated by the 800-pound gorillas in the single-family rental space,” said Daren Blomquist, vice president at RealtyTrac.

The firms revealed that the top 25 markets had the highest gross rental yields in counties where institutional investor purchases accounted for 5% or less of all residential sales in the three-month period ending in July. Also, the unemployment rate was below 7.5%.

Counties in Texas, Oklahoma, New York, Tennessee and Florida dominated the list of overlooked markets, taking the top 10 spots.

Overall, Wichita County in Texas was honored as the best market for single-family rentals. Here, the median market value for a single-family home is $84,000, while the median rent value is $938. This results in a gross yield of 13.4%. The unemployment rate in Wichita County as of July is 6.8%, said RealtyTrac, Irvine, Calif., and Westminster, Colo.-based RentRange.

The counties that were behind Wichita County rounding out the top 10 single-family rental markets were Lubbock, Texas; Onondaga, N.Y.; Canadian, Okla.; Tompkins, N.Y.; Williamson, Texas; Monroe, N.Y.; Davidson, Tenn.; Alachua, Fla.; and Schenectady, N.Y.

“Real estate investment opportunities vary greatly market by market,” said Wally Charnoff, CEO of RentRange. “The availability of gross rental yield information and other valuable analytics empower buyers to make more scientific decisions about where to invest.”