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Investors Widen U.S. Rental Search as Home Costs Rise
John Gittelsohn & Heather Perlberg / Bloomberg/Businessweek / April 4, 2013
Landlords seeking the highest returns for single-family homes should hit the road as rental rates weaken in Atlanta, Phoenix and Las Vegas, where institutional investors have flooded the market.
The best deals, measured by leases and the cost of becoming a landlord, are in Memphis, Tennessee, Saginaw, Michigan and Toledo, Ohio, according to a report today by RealtyTrac, a real estate data provider.
“In a lot of markets across the country, there are still some good opportunities to buy rentals,” Daren Blomquist, vice president of Irvine, California-based RealtyTrac, said in a telephone interview. “You may just have to look a little bit harder.”
Margins are shrinking fast in Phoenix, Atlanta and Las Vegas, as low mortgage rates fuel price increases and buyers from private equity firms compete for limited inventory. Blackstone Group LP (BX), the world’s largest private equity firm, has spent $3.5 billion on 20,000 single-family homes, and Thomas Barrack’s Colony Capital LLC has raised $2.2 billion for rentals. In Memphis, a three-bedroom home generates a 10.4 percent annual return on investment compared with 8.8 percent in Phoenix, 9.7 percent in Atlanta and 9.9 percent in Las Vegas, according to the RealtyTrac report.