Two firms, Parcl Labs and ATTOM, have estimated gross rental yields (median gross annual rent income divided by median property acquisition price) for single family homes as rental properties and then determined which metro markets has the highest values.
But are the results the same? No, they aren't, raising questions about how CRE investors need to dig into data to better understand what they're hearing.
First, data from Parcl Labs, as presented by ResiClub in a Fast Company article. The company took the monthly median price on new rental listings in 52 markets and multiplied by 12 to get the median annual rental income. It then took the median price of new home listings to get the median acquisition price. Finally, they divided the rental incomes by the acquisition prices to get the gross rental yields.
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Here are the five top metro areas mentioned with the gross rental yields: Cleveland (8.4%), Buffalo-Cheektowaga (8.1%), Chicago-Naperville-Elgin (7.8%), Detroit-Warren-Dearborn (7.5%), and Pittsburgh (7.2%).
Next, data from ATTOM. "The analysis for this report incorporated median rents and median home prices collected from ATTOM's nationwide property database, as well as publicly recorded sales deed data licensed by ATTOM," the company explained. They analyzed "single-family rental returns in 341 U.S. counties with a population of at least 100,000 and sufficient rental and home price data" for three-bedroom houses.
Their top five choices were Indian River County, FL (14.6%); St. Lous City, MO, (14.6%); Cameron County, TX (13.2%); Monroe County, NY (12.8%) and Richmond County, GA (12.7%).
Totally different results likely derive from the different ways someone can look at data. Here are some examples:
Parcl seemed to focus on metropolitan statistical areas. ATTOM uses county data. The geographic breakdowns are completely different, and so work off different groupings of houses.
ATTOM explicitly said it focused on three-bedroom houses. It isn't clear whether Parcl looks at similar properties or includes smaller ones that would have lower annual rents and acquisition prices.
Parci looked at only 52 markets. ATTOM analyzed 341 counties. A larger group might offer more chances of both higher and lower gross rental yields.
Parcl used medium prices of new home listings for the acquisition price. ATTOM uses sales deed data, which might be lower or higher than the listing price. Also, new home listings usually mean exactly that — new homes, not pre-existing sales, so a subset of all sales.
When looking for data to support strategic investing decisions, recognize that ranked lists might come to different conclusions based on the structures of their analyses. Best to look around and see which set might best suit your needs.
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