No, you’re likely not going to find a real estate investment that offers strong price growth and hefty rental income
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Are you a real estate investor looking for strong price growth and great cash flow?
Good luck with that.
It’s a truism among real estate professionals that properties can be one or the other, but not both. In the world of single-family rentals, or houses that investors buy in order to lease out, metro areas in the middle of the country will likely offer dependable rental streams but none of the runaway price appreciation seen in coastal areas like Seattle.
New tools from Attom Data demonstrate that principle visually. Attom pulled together extensive data not just at the metro level but by individual neighborhoods to rank nearly 11,000 communities according to a letter grade from A to F. Those rankings depend on things like school quality, crime, and unemployment.
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| Grade | Median Prices | Annual Home Price Appreciation | Avg School Scores (5 is Best) | Avg Crime Rates (100 is Nat'l Avg) | Unemployment Rate | Avg Fair Market Rent for 3-Bedroom | Annual Rent Appreciation | Gross Annual Rental Yields |
| A | $513,968 | 21.0% | 3.81 | 73 | 2.5 | $2,132 | 9.2% | 7.9% |
| B | $409,225 | 11.0% | 3.27 | 91 | 3.1 | $1,991 | 9.8% | 8.6% |
| C | $351,756 | 9.8% | 2.67 | 117 | 3.6 | $1,830 | 10.3% | 9.2% |
| D | $321,778 | 7.5% | 2.18 | 145 | 4.1 | $1,748 | 10.6% | 9.5% |
| F | $299,934 | -0.4% | 1.76 | 211 | 4.6 | $1,712 | 12.7% | 10.1% |
Information about the averages within each grade reveal a lot about what investors in each category should expect. Annual home price appreciation for an “A” grade property is about triple that in a “C” category, but annual appreciation in rents and gross annual rental yields are higher in the lower-rated categories.
And the beauty of being able to rank hyper-local communities is that, in the words of Attom Data Vice president Daren Blomquist, “there is a lot of diversity. There are good neighborhoods in a lot of different parts of the country and they’re not all going to look exactly like each other.”
That means that among the top three metro areas in the “A” category across the country, Attom’s methodology has the Westlake neighborhood of Mobile, Alabama, edging out the Union section of San Jose, California. San Jose is known for being the priciest metro area in all of the United States, with a median that tops $1 million, making the 95008 zip code’s median price of $795,000 seem like a downright bargain, Blomquist said.
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