Best & Worst Markets for Rental Returns: Heat Map

Cash-flowing rental properties allow investors to build wealth over the long term in the form of an appreciating asset while also generating monthly income.

Good cash-flowing rentals can be found in many U.S. markets, but rapidly appreciating home prices are making it more difficult. The heat map below shows where median home prices and average rental rates make for good — and not so good — returns on rental properties.

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The rental return for each county is the gross rental yield, calculated by taking the 2014 fair market rent for a three-bedroom home multiplied by 12 (months) and then dividing that 12-month total by the median sales price of residential properties in the county.

Best & Worst Markets for Rental Returns

Methodology
To calculate the annual gross rental yields we used the median sales price for January 2014 except in states where the sales prices is not required to be disclosed on the sales deeds. In those non-disclosure states we used the  median list price for January 2014. The rental rates we used were the average fair market rent on three-bedroom home for 2014 from the U.S. Department of Housing and Urban Development. A total of 1,586 counties had sufficient data for the analysis. We limited the Top 20 and Bottom 20 lists to counties with a population of at least 50,000 or more.

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