Raleigh is a top market for investing in rental property. Why that isn’t a surprise.
Rising home prices and an increase in renters have placed the Raleigh metropolitan area at number six on a list of the top 10 rental investment markets in 2020, according to a study by Millionacres, a real estate investment company that is part of the financial advice company The Motley Fool.
The study ranked metro areas by market indicators — ratio of median home list prices to median annual rent, annual population change, total annual growth in residential permits, and employment growth. The Raleigh metro’s index score was 81.2, with 87 being the highest. Here are some of the contributing factors:
▪ From 2017 to 2018, its Raleigh metro population increased by 2.1% and permit growth was 12.5%, with an estimated population of 1,362,540, according to the Census Bureau.
▪ Employment grew by 15% between October 2014 and October 2019, according to the Bureau of Labor Statistics.
▪ Price-to-rent ratio in was 20.5, according to real estate firm Zillow.
Deidre Woollard, editor of Millionacres, said considerations for this study differ from the way they rate ideal places for just owning homes.
“What we’re looking for is not just real estate prices, but also what the rents are doing as well,” said Woollard. “We’re trying to find that sweet spot where rents are high and going up, but home prices aren’t so high that they have pushed out rental investors.”
Population growth alone doesn’t mean high renter demand, since it has to rise along with price-to-rent ratios.
As a whole, the Triangle has numbers that are attractive to investors: the Durham-Chapel Hill metro area was also ranked in the list at number 29. Durham-Chapel Hill received an index score of 71 with 1.8% in population change, 10% in permit growth, 15.2% in five-year employment change, 20.9 in price-to-rent ratio and an estimated 2018 Censuspopulation of 575,412.
Growth in the Triangle
Woollard said that many new families and hires in the tech market will rent while they look for a home and will rent multifamily housing that is increasing in urban density, but also single-family homes.
“It’s changing construction,” she said. “People that are looking for [...] some of the things they had in larger areas, they want walkability. They want easy access to shops and restaurants. So you start seeing in smaller urban areas more urbanized neighborhoods that have some of those features that people love in bigger cities.”
Wake County, Raleigh are popular for renters
The News & Observer reported previously that the Raleigh metro area paid $2 billion in total rent in 2019, twice what it paid in 2010, based on a report from Zillow..
Data from RENTCafé listed the Raleigh metro as a top place for renters above the age of 60 and for renters with incomes over $150,000.
National real estate data firm RealPage said monthly apartment rents now average $1,166 in Raleigh/Durham, nearly $250 below the national norm, in a fourth quarter 2019 report. According to the data, apartment occupancy here was 95.2% at year end, and rent grew at rate of 4.5%, among the fastest nationally.
