5 Cities with Booming Single-Family Rental Markets

COVID-19 shined a light on the single-family rental industry, and real estate investors continue to embrace SFR investments as a reliable path to profit.

The single-family rental market was bolstered by a nationwide housing shortage, historically low interest rates, and a COVID-created trend of older millennials leaving big city apartment life behind for larger dwellings in the suburbs. Lima One’s analysis shows that the SFR industry remained recession-proof through the pandemic, just as it did during the Great Recession of 2008.

Because so many people suddenly needed to turn their home into an office or classroom, COVID created a demand for more space in suburban areas less densely populated. As a result, the single-family rental industry flourished.

Major metropolitan cities across the country became particular hotbeds for single-family rentals, but some markets were hotter than others. Take a look at five cities that show great potential for single-family rental investors.

Atlanta, GA

Atlanta metro’s home prices surged during and post-COVID. While it took the capital of Georgia and its real estate market nearly eight years to rebound after the Great Recession of 2008, home prices spiked starting mid-summer of 2020. One reason was a lack of supply, as the number of homes being listed dropped and the average days on the market dropped as well.

Given the insatiable hunger for single-family homes, new construction is hot in Atlanta, as single-family construction permits have increased. But Atlanta matched the national trends of construction taking longer because of labor and permitting delays during COVID plus spiking lumber prices. On the other hand, multi-family construction permits have decreased during this time.

Market experts predict that Atlanta’s housing market will remain hot in 2021. While inventory might be harder to find, real estate investors with strong strategies can still profit. The southern suburbs seem to be a particularly friendly area for investors.

Baltimore, MD

Location is also huge for Baltimore. The city is about 40 miles from Washington D.C., which has led to years of federal investment. The region is home to various agency headquarters including the National Security Agency, Social Security Administration, and the U.S. Cyber Command.

As the economy continues to recover, employment sectors such as construction, manufacturing, trade and transportation, and financial activities are showing the fastest growth. A Business Insider report shows that homes in the Baltimore metro are flying off the market, some being sold as quickly as three days after listing.

According to Roofstock data:

  • Homes values in the Baltimore metro have increased by 7.0% year-over-year and are forecast to grow by another 11.2% over the next 12 months.
  • Over the past five years home values in Baltimore have increased by more than 20%.
  • Median listing price of a single-family home in the Baltimore metro is $265,000 based on the most recent research from Realtor.com (Nov. 2020)

Chicago, IL

Chicago’s real estate market saw strong housing demand despite decreasing inventory during the pandemic. Median home prices increased, the number of homes listed for sale dropped, and the number of homes listed for sale dropped.

Despite seeing a decrease in multi-family permits, Chicago saw an increase in single-family construction permits. Statistics show that Chicago residents want single-family living in less dense suburban areas, which is mirroring the same national trend. This creates real estate investment opportunities across fix-and-flipsingle-family rental, and new construction projects.

Jacksonville, FL

Jacksonville’s real estate market is a hot spot as the economy continues to recover. The Jacksonville Business Journal reported in late 2020 that people are continuing to move to Jacksonville in search of a more affordable suburban lifestyle in a smaller market rather than staying in a crowded urban living in an expensive big city.

In January 2020, the median sale price of a home in Jacksonville was $256,995 – an increase of almost 11% compared to the previous year.

Location is a huge plus for Jacksonville. The city lies along the banks of the St. Johns River and along the Atlantic Ocean and is close to tourist destinations like Orlando and Miami. Jacksonville’s location, business-friendly government, amazing weather, affordable cost of living, and quality of life help make it a real estate investor’s dream.

Philadelphia, PA

No doubt that Philadelphia has turned into a real estate investor’s city, but it’s also turned into a renter’s city. The real estate boom is creating a place for renters to flocking to. About 45 percent of the total occupied housing units in the city are renter-occupied.

Philadelphia’s economy is incredibly diverse. City residents can find jobs in several key business sectors including financial services, biotechnology and health care, information technology, trade and transportation, oil refining, and food processing.

Affordable rent is another huge reason renters are flocking to Philadelphia. The average rent is $1,660, which is attractive for residents while providing strong return for investors. Over the past three years, Philadelphia’s average rent has increased by 8.7 percent above the national average, which means Philadelphia investors see their profits growing.

The Philadelphia fix-and-flip market is also red hot right now. It’s producing great ROI for investors, and it’s the place to be if you’re a fix-and-flip investor or fix-to-rent investor.

Conclusion

COVID and 2020 created a huge spotlight for single-family rentals. The increase in demand brought with it a rise in prices that put homeownership out of reach for many, despite the historically low rates. Many investors saw the opportunity to jump on the building boom of single-family rental properties, betting that those who couldn’t pay a suburban mortgage would be willing to rent in the suburbs instead.

With a market this hot, the last thing you want to do is miss out on an investment property – whether you’re building-to-rent or purchasing a portfolio. Lima One has a number of rental loan options available to help you fund your investment. When it’s time to fund your next single-family rental project, let Lima One help you.

Lima One Capital, LLC. NMLS ID # 1324403, 201 E. McBee Ave. Suite 300. Greenville, SC 29601. Lima One Capital, LLC is not currently licensed in AK, ND, NV, SD, or VT. Lima One Capital, LLC is licensed or exempt from licensing in all other states. Minnesota: This is not an offer to enter into an agreement. Any such offer may only be made in accordance with the requirements of Minn. Stat. §47.206(3). Lima One Capital, LLC is licensed in Arizona as a Mortgage Banker (License No. 0949706). Lima One Capital, LLC is licensed as a California Finance Lender under Department of Business Oversight (License No. 60DBO-45834). Lima One Capital, LLC is licensed in Florida as a Mortgage Lender (License No. MLD1555) and Mortgage Servicer (License No. MLD1662). Lima One Capital, LLC is licensed in Oregon as a Mortgage Lender (License No. ML-5397). Annual percentage rate may be increased after fixed-rate period expires. Loans are subject to additional underwriting criteria.