While it’s anybody’s guess which team will win the big football game on Sunday, here at HomeUnion®, we have our favorite. No, we don’t have a crystal ball, but we do have an opinion on which of these two single-family rental (SFR) investment markets – Atlanta or Boston – will take home the investment ring. Strictly from an investment perspective, we can categorically state that Atlanta beats Boston, hands down. This peach of a market has all the hallmarks of a winning investment destination, with none of the drawbacks investors in coastal markets often face.
To rank these markets, HomeUnion® took an in-depth look at the supply and demand drivers powering each market, including employment growth, rents, construction, cap rates, and median prices. Additionally, when pitting two markets against one another, the locale with high cap rates and lower entry costs were given preference, as this ensures a stronger short-term return.
The biggest factor preventing Boston from taking home the gold is the cap rate for the metro’s properties. With median prices closing out the year at nearly $300,000 and cap rates at a 5.4 percent, those who choose to invest in this New England market are up against higher-than-average entry prices and tight inventory levels, a one-two-punch few have the resources to take on. On the plus side, anyone patriotic enough to take a chance on this coastal market will have little trouble finding a tenant; vacancy levels are expected to drop to 2.1 percent this year, which come in as one of the lowest rates in the nation. Rents are similarly strong, above $2,500 per month. Unless you’re looking for a long-term appreciation play, our recommendation would be to avoid this overheated market for a sweeter deal in Atlanta.
Here’s why Atlanta comes out on top: Employment levels in this southern jewel have surpassed national levels. In fact, it is expected that employment in this metro will grow nearly 3 percent this year. And here’s the kicker: Strong employment will boost both rents and occupancies. Median home prices are still affordable, coming in at $115,000 in 2016, while cap rates soared past 7.5 percent. Despite higher vacancy levels and lower comparative rents, it’s important not to take these factors alone at face value. Investors in Atlanta SFRs get far more yardage for their buck, making this metro the clear winner.
While we don’t know who is going to take home the world champion title this year, investors in Atlanta will most definitely come out on top!