If you’re looking to expand your single-family rental (SFR) portfolio, you’re in luck. According to a new report from property data firm CoreLogic, SFR rents are up across the country, clocking in at a median $1,482 per month -- an increase of just under 3% since July 2018.
On entry-level properties -- those with rents under 75% of the regional median -- rents have jumped even more, increasing 3.5% over the year. High-end property rents rose 2.7%.
According to CoreLogic’s principal economist Molly Boesel, investors can expect more increases in the coming months.
Rent increases on entry-level properties continued to outpace the rest of the rental market," Boesel said. "This trend should continue in the near term with strong demand from younger millennials who indicate they prefer to rent rather than own a home."
It’s true: CoreLogic’s own Consumer Housing Sentiment Study shows that 63% of consumers between the ages of 21 and 29 prefer to rent rather than buy. Data from the Urban Institute shows a millennial homeownership rate much lower than that of other generations (just 32% versus 60%–70% for Gen Xers and baby boomers).
The top markets for single-family rentals
It’s important to remember that real estate is local -- rising national rents doesn’t mean it’s a great time to invest in SFRs everywhere. Some places are much better options than others.
Take Phoenix, for example. According to CoreLogic’s data, the city claims the highest SFR rent increase in the country, with a 7.2% jump since last July. Seeing as Phoenix saw employment grow by nearly double the national rate this year, it’s no surprise that rents have followed suit.
The Las Vegas metro, which also includes nearby Henderson and Paradise, saw a 5.7% jump, as did Tucson, Ariz. Detroit rents are also rising more than other metros, with a 3.5% uptick over the year.
Here are the top 10 markets where SFR rents are trending upward.
|Metro Area||Single-Family Rent Increase|
If you’re investing in multifamily properties, the story’s much the same. Phoenix and Las Vegas saw the biggest increases in apartment rents in August, with jumps of 8.5% and 7.7%, respectively.
However, the spikes are limited to a few areas. Rent growth has slowed considerably in the apartment market, with national rents rising just 0.1% over the last month, according to RENTCafe.
The bottom line
Rents are rising, and continued demand from millennials could help that trend continue. Just make sure you study up on market-level data first and take national numbers with a grain of salt. Areas with more young people, as well as more employment opportunities, are clearly safer bets than others.