Wall Street is at it again…buying up single-family houses with the intention of putting them on the rental market. According to Bloomberg, Wall Street bought 29,000 single-family homes in concentrated markets in 2017, the largest such buy since 2014.

Entities such as the Blackstone Group began scooping up homes out of foreclosure with cheap funding in late 2011. These entities became the nation’s largest landlords. They spun off these properties into REITs or Real Estate Investment Trusts. From there, Wall Street developed REITs into its own structured security called rent-backed securities. The peak of that market, up until now, was 2013.

Today, the largest players within this rent-backed security structure include Cerberus Capital Management, Amherst via Main Street Renewal and the publicly traded Invitation Homes, American Homes 4 Rent and Tricon. Add RoofStock, an industry disruptor launched in 2015 that offers an online marketplace of already leased single-family homes for both institutional and retail investors to buy, to this mix of players.

Remember that in 2016 35% of all single-family home sales went to buyers who did not intend to live in those homes, according to Attom Data Solutions. This trend continues to grow as homeowner rates decrease (64.2% in April 2018 from 69.4% in 2004, according to the US Census Bureau) and we increasingly become a nation of renters.

America’s Top Single-Family Rental Markets according to HomeUnion’s Research Services Team

  1. Nashville

Median Sales Price: $125,000

Gross Rental Yield: 13.3%

  1. Milwaukee

Median Sales Price: $82,500

Gross Rental Yield: 20.7%

  1. Indianapolis

Median Sales Price: $92,900

Gross Rental Yield: 20.7

  1. Tampa

Median Sales Price: $97,900

Gross Rental Yield: 15.9%

  1. Birmingham

Median Sales Price: $70,000

Gross Rental Yield: 18.1%

  1. Jacksonville

Median Sales Price: $96,000

Gross Rental Yield: 15.8%

  1. Cincinnati

Median Sales Price: $70.000

Gross Rental Yield: 21.6%

 

  1. Baltimore

Median Sales Price: $110,000

Gross Rental Yield: 18.9%

  1. Orlando

Median Sales Price: $124,500

Gross Rental Yield: 12.8%

  1. Charlotte

Median Sales Price: $123,600

Gross Rental Yield: 12.1%

In more expensive markets, Sacramento shot to the top of the list based upon the nation’s second highest rental forecast. San Jose continues to command top rental prices due to high demand and high paying tech jobs.