There are types of towns that will always have heavy rental housing demands: college towns and military base markets. Military markets, however, have year-round occupants while college and university towns have a higher summer vacancy rate. Each are attractive opportunities for investors.
To help guide investors in markets with military bases, HomeUnion analyzed towns having a minimum 15,000 of active duty personnel and their families. They calculated the capitalization rate for single family dwellings in those markets. Value (home purchase price) is net operating income (first year of rents minus expenses) divided by the capitalization rate. The larger the capitalization rate, the greater the return.
Net Operating Income
Value = ——————————–
What markets and respective military bases had the best capitalization rates?
To read the entire report plus a listing of additional towns click http://rismedia.com/2016/08/27/the-best-military-towns-named-for-investing-in-rental-homes/
Are there other variables to consider? Home value appreciation comes into mind, but rents are pretty much related to each military base’s housing allowance for the personnel. Not included in this analysis are the tax effects: interest, depreciation and hopefully favorable capital gains tax when the property is sold, enhancing these returns.
Given these returns, with the current 10-Year Treasury yielding just 1.57 percent, single family rentals in military base markets look very attractive.