Memphis Has the Most Favorable Cap Rate, While San Francisco Has the Least Favorable
IRVINE, Calif., Feb. 23, 2016 — HomeUnion, an online real estate investment management firm enabling value investing in single-family rental (SFR) properties, announced today a ranking of the most and least favorable SFR markets measured by cap rate. Memphis tops the list with a cap rate of 7.3%, while the lowest cap rate in the study is San Francisco, at 2.7%.
Cap rates are the relationship between an investment property’s net operating income (rents minus expenses) and the market value of the property.*
“Other asset classes underperformed in 2015, while single-family rental investors saw healthy returns in terms of income and appreciation in markets across the country,” explained Steve Hovland, manager, research services at HomeUnion. “Favorable supply and demand fundamentals and shifting views about renting among Millennials and seniors, created increased occupancy rates, which resulted in higher rent prices.”
Based on cap rates, the top 10 SFR investment markets are:
|
Metro Area |
Cap Rate |
|
Memphis |
7.3% |
|
Oklahoma City |
6.9% |
|
Pittsburgh |
6.4% |
|
Cincinnati |
6.4% |
|
Houston |
6.1% |
|
Indianapolis |
6.0% |
|
Cleveland |
5.9% |
|
Baltimore |
5.9% |
|
Milwaukee |
5.9% |
|
Tampa |
5.9% |
Based on cap rates, the bottom (least attractive listed first) 10 SFR investment markets are:
|
Metro Area |
Cap Rate |
|
San Francisco |
2.7% |
|
San Jose |
2.7% |
|
Orange County (California) |
3.0% |
|
Los Angeles |
3.2% |
|
New York City |
3.5% |
|
Seattle |
3.5% |
|
Oakland |
3.5% |
|
San Diego |
3.6% |
|
Sacramento |
3.6% |
|
Portland |
3.9% |
“With continued turmoil in the securities markets, individual investors are increasingly looking for an alternative to low-yield bonds and risky stocks,” explained Don Ganguly, CEO of HomeUnion. “The SFR market is not correlated to the securities market, and with the right research, investors can find high-yield investments in markets anchored by solid, diverse economies and favorable demographics.”
About HomeUnion
HomeUnion is an online real estate investment management firm, bringing value investing to the individual investor in single-family rental (SFR) properties. Based in Irvine, Calif., it provides all the services needed for individuals to invest remotely in SFR properties. The company uses a combination of data-driven proprietary analytics to incorporate over 120M homes and 200,000 neighborhoods into their database, and then delivers its solutions to an on-the-ground infrastructure that currently serves more than 20 locations and expanding. HomeUnion’s role spans the lifecycle of the investment transaction: from identifying sound investments; handling all aspects of acquisition; maximizing income; protecting asset value; and selling it when the time comes.
