The housing bust has helped turn Broward and Palm Beach counties into two of the nation's best areas for investors seeking single-family home rentals, according to a North Carolina research firm.
A fourth-quarter analysis of 100 U.S. housing markets by Local Market Monitor ranks Broward eighth and Palm Beach County 14th. Las Vegas is first.
Aside from Broward, four other Florida markets made the top 10: Daytona Beach (two), Orlando (four), Fort Myers (five) and Tampa (nine).
"We think Florida is one of most interesting states in terms of rental property opportunities," Ingo Winzer, president and founder of Local Market Monitor in Cary, N.C., said in a statement. "That's because home prices haven't bottomed out, and rents will eventually be supported by renewed population growth."
Metro areas are ranked by the expected returns of single-family homes bought as rentals. The report helps investors determine how much to pay for properties.
Local incomes, job growth and rental rate growth were among the factors the firm considered in determining the best communities for investment.
Markets at the top of the list have endured large home price declines during the housing downturn. Investors who buy in these areas can expect above-average returns, assuming they can keep the properties rented, according to Local Market Monitor.
That shouldn't be an issue for many investors because the rental market, particularly in South Florida, has been strong for at least the past two years. Thousands of bank-owned homes are being resold to investors, who are renting them until the housing market improves.
Meanwhile, demand for rentals is on the rise. Foreclosures and price declines have many residents leery of homeownership or unable to qualify for mortgages.
David Hicks, co-president of HomeVestors, a Dallas-based firm that buys and sells rentals, said this is the best environment for single-family investors in 30 years.
"People who have been displaced from the housing market want to find a home — they don't want to go back to apartments," Hicks said Wednesday.
Deerfield Beach housing consultant Jack McCabe forecasts annual rental rate increases of 5 percent to 15 percent in South Florida for the next three to five years.
McCabe said he's working with two South Florida investor groups that are targeting single-family homes. He expects the investors to buy and rent before eventually selling.
"They have an opportunity to make some very sizable profits as an exit strategy," McCabe said.
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