Single-family rental properties remain a strong investment in Central Pa.
As U.S. homeownership rates continue to decline, rental properties have continued to pick up steam, driving steady returns for investors.
But not everyone is renting one- and two-bedroom apartments.
Single-family homes are a growing segment of the rental market, with investor-owned properties estimated to make up between 12 percent and 20 percent of homes in Central Pennsylvania, according to California-based ATTOM Data Solutions, parent company of RealtyTrac.
In Central Pennsylvania, rent for three-bedroom homes averages about $1,100 to $1,250 per month. The rates are up 1 percent to 5 percent this year in much of the area, according to ATTOM.
For local investors, the average annual gross rental yield — a measurement based on rent and home value — is growing as sale prices have gone up.
Dauphin County led the way locally with a 10.7 percent average annual return. The median sale price in the county for a three-bedroom home was $134,423 between January and July, according to ATTOM. Rents average $1,203 per month.
York County was No. 2 with a 9.6 percent return. The median sale price was $155,000 through the first seven months of the year, with average rent at $1,237.
Investors with properties in Lebanon County averaged a 9.5 percent return, followed by 8.5 percent in Lancaster County and 8.3 percent in Cumberland County.
By comparison, the average yield nationwide was 8.7 percent for single-family home rentals analyzed across 473 counties, according to ATTOM. That was down slightly from last year, but it's still an attractive alternative investment compared with the volatile stock market.
Also, a growing number of single-family rental properties in Central Pennsylvania are being purchased by institutional investors, defined as entities purchasing at least 10 properties in a calendar year.
Those buyers were most prevalent in York County through July with 6.2 percent of purchases linked to institutional investors, according to ATTOM. In Dauphin County, those buyers accounted for 5.6 percent of purchases.
Nationwide, institutional investors bought 2.7 percent of all single-family homes sold in the first seven months of the year.