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Recently, individual mom-and-pop rental investors have largely strayed away from single home investments due to the market being overrun by large institutional investors.  But certain markets are looking more promising for landlords searching for good bargains and strong rental cash flow from foreclosures and single family homes.

Foreclosure- and real estate analyst RealtyTrac compiled data to compare markets nationwide, to calculate capitalization rates along with average cash flow, and compiled a list of the 10 best markets nationwide for purchasing single-family dwellings to hold as rental properties.

Rental Investment Cash FlowMemphis, TN
Median Sales Price 3-Bedroom Home: $72,605
Average Rent 3-Bedroom Home: $1,047
Estimated Monthly Mortgage Payment: $277
Financed Monthly Cash Flow: $351
Cash on Cash Rate of Return: 29%
Cash Purchase Cash Flow: $628
Cash Purchase Cap Rate: 10.38%

Saginaw, MI
Median Sales Price 3-Bedroom Home: $63,240
Average Rent 3-Bedroom Home: $907Landlord Cap Rates by City
Estimated Monthly Mortgage Payment: $242
Financed Monthly Cash Flow: $302
Cash on Cash Rate of Return: 29%
Cash Purchase Cash Flow: $544
Cash Purchase Cap Rate:10.32%

Toledo, OH
Median Sales Price 3-Bedroom Home: $67,617
Average Rent 3-Bedroom Home: $963
Estimated Monthly Mortgage Payment: $258
Financed Monthly Cash Flow: $320
Cash on Cash Rate of Return: 28%
Cash Purchase Cash Flow: $578
Cash Purchase Cap Rate: 10.26%

Ocala, FL
Median Sales Price 3-Bedroom Home: $75,357
Average Rent 3-Bedroom Home: $1,070
Estimated Monthly Mortgage Payment: $288
Financed Monthly Cash Flow: $354
Cash on Cash Rate of Return: 28%
Cash Purchase Cash Flow: $642
Cash Purchase Cap Rate: 10.23%

Rental Agreement Cash FlowLas Vegas, NV
Median Sales Price 3-Bedroom Home: $115,000
Average Rent 3-Bedroom Home: $1,575
Estimated Monthly Mortgage Payment: $439
Financed Monthly Cash Flow: $506
Cash on Cash Rate of Return: 26%
Cash Purchase Cash Flow: $945
Cash Purchase Cap Rate: 9.86%

Palm Bay, FL
Median Sales Price 3-Bedroom Home: $91,950
Average Rent 3-Bedroom Home: $1,248
Estimated Monthly Mortgage Payment: $351
Financed Monthly Cash Flow: $398
Cash on Cash Rate of Return: 26%
Cash Purchase Cash Flow: $749
Cash Purchase Cap Rate: 9.77%

Atlanta, GA
Median Sales Price 3-Bedroom Home: $84,000
Average Rent 3-Bedroom Home: $1,132
Estimated Monthly Mortgage Payment: $321
Financed Monthly Cash Flow: $358
Cash on Cash Rate of Return: 26%
Cash Purchase Cash Flow: $679
Cash Purchase Cap Rate: 9.70%

Rental Cap RateJacksonville, FL
Median Sales Price 3-Bedroom Home: $90,000
Average Rent 3-Bedroom Home: $1,198
Estimated Monthly Mortgage Payment: $344
Financed Monthly Cash Flow: $375
Cash on Cash Rate of Return: 25%
Cash Purchase Cash Flow: $719
Cash Purchase Cap Rate: 9.59%

Deltona, FL
Median Sales Price 3-Bedroom Home: $94,000
Average Rent 3-Bedroom Home: $1,225
Estimated Monthly Mortgage Payment: $359
Financed Monthly Cash Flow: $376
Cash on Cash Rate of Return: 24%
Cash Purchase Cash Flow: $735
Cash Purchase Cap Rate: 9.39%

Rental Property Cash FlowSpringfield, MO
Median Sales Price 3-Bedroom Home: $75,102
Average Rent 3-Bedroom Home: $969
Estimated Monthly Mortgage Payment: $287
Financed Monthly Cash Flow: $294
Cash on Cash Rate of Return: 24%
Cash Purchase Cash Flow: $581
Cash Purchase Cap Rate: 9.29%

Methodology:

To calculate cap rate and cash flow, RealtyTrac assumed a 20 percent down payment and a 4% interest rate to estimate the monthly mortgage payment.  Based on feedback from real estate investors, RealtyTrac subtracted an additional 40 percent out of the gross monthly rental proceeds for property taxes, insurance and repairs.

RealtyTrac limited the list to metropolitan areas with a population of at least 200,000.  They also only used areas where sufficient price and rental data was available and then further restricted the list to markets where the average monthly gross rent of a 3-bedroom home was at least 1% of the median sales price in that specific market. 

Results are sorted by Cash Purchase Cap Rate.


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