BYTHE NUMBERS
LOCAL MARKET MONITOR
Splitting Up: Best Markets for Subdividing Single-FamilyRentals AN INNOVATIVE WAY TO IMPROVE YOUR RETURNS IN MARKETS THAT FAVOR RENTALS.
by Ingo Winzer
o most minds, the easiest way to invest in a single-family rental property is to just rent it out “as-is” - may- be after a coat of paint. In some markets, however, you can get a far better return if you buy a house and split it into several rental units rather than renting as a traditional single-family home. Sure, splitting up a house into rental units will cost more, will take longer - maybe even a year - and the process can be frustrating. Meanwhile you won’t be collecting a dime of rent. You’re probably asking yourself right now, “Is that really such a good idea?” You bet it is! Even if the conversion costs add 50 percent to your purchase T
growth and we expect demand for housing in these areas to stay strong. Location is key. Find a property near a college, a hospital, or a local town center. Split it up and you can charge rents well above the average. •
price, the rent from three units can almost double the return you might otherwise expect from that property. The trick to making this strategy work, of course, is to invest in a market where the high demand for housing makes rental units very attractive, especially for people who are inclined to rent anyway, like young professionals, faculty and staff at colleges, and healthcare workers. This edition’s top 10 markets have a high ratio of home prices to annual rents, which means that homes are too expensive for most renters, and local properties are too expensive to rent out as a single unit after purchase. They all have good economic
IngoWinzer is president of Local Market Monitor, which analyzes conditions in 300 U.S. markets, using such economic data as home values and growth in employ- ment and population. Winzer, who has
analyzed real estate markets for more than 20 years, was a founder and executive vice president of First Research, an industry research company that was acquired by Dun & Bradstreet in March 2007. He is a graduate of MIT and holds an MBA in finance from Boston University. Winzer resides in Cambridge, Mass. www.localmarketmonitor.com
LATEST ANNUAL JOB GROWTH (%)
2017 POPULATION
UNDERPRICED VS INCOME
3-YEAR HOME PRICE FORECAST
AVG. HOME PRICE (THOUSANDS)
AVERAGE MONTHLY RENT
LOCAL MARKET MONITOR
312,409
-32%
13%
$167
$801
1.3
Green Bay, WI
454,143
-27%
19%
$192
$1,034
2.2
Visalia-Porterville, CA
741,065
-23%
19%
$172
$820
2.1
Greensboro-High Point, NC
243,513
-22%
20%
$185
$849
3.6
Sioux Falls, SD
580,270
-22%
14%
$173
$862
1.8
Augusta, GA
216,080
-21%
14%
$181
$1,030
1.5
Tyler, TX
599,789
-20%
14%
$187
$886
1.3
Des Moines, IA
211,853
-13%
21%
$195
$841
2.7
Rochester, MN
271,124
-13%
23%
$188
$872
1.9
Kennewick-Richland, WA
819,743
-9%
27%
$281
$1,226
2.7
Tacoma, WA
Source :: Local Market Monitor
110 | think realty magazine :: october 2017
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