Real estate prices are climbing so high in some markets that the income potential from rent can't keep up, causing many investors to seek bargains elsewhere.
According to the S&P/Case-Shiller index of 20 metropolitan areas, single-family home prices rose 23 percent in January from 2012. The biggest increases from December 2013 to January 2014 were in Las Vegas and Miami, while San Francisco and Las Vegas had the biggest year-over-year increases.
To find the best and worst metro areas for rentals, RealtyTrac calculated gross rental yield on a three-bedroom home using 2014 fair market rent values and median home sales prices in various metro markets. Below are the five best and five worst markets for potential rental yield.
5 best markets for rental returns
|Metro area||Median sales price||Average rent||Annual gross yield|
|Greenville, Miss.||$42,000||$862||25 percent|
|Macon, Ga.||$50,880||$1,008||24 percent|
5 worst markets for rental returns
|Metro area||Median sales price||Average rent||Annual gross return|
|Edwards, Colo.||$525,000||$1,545||4 percent|
|San Francisco||$890,500||$2,657||4 percent|
|Brooklyn, N.Y.||$573,000||$1,852||4 percent|
|Marin County, Calif.||$745,000||$2,657||4 percent|
Here's a handy way to calculate gross yield on rental properties.
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