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56 limited housing availability. "It's an extremely strong market with plenty of applicants for a property once it comes back on comes back on the market," Tamulevich said. In some areas, the values of home rental properties have been increasing by 10% annually, according to Riehl. However, he expects the appreciation in those markets to start to level off. "Rents are increasing at a higher a higher pace than we've ever seen," Pintar added. "On average, we're getting about a percent per year. e demand for quality rental housing is continuing to get stronger and stronger." MIGRATORY IMPACTS People are continuing to move out of California and New York for areas where they can have lower taxes and lower cost of living, Tessar said. ose moves have been made easier by many companies opting to limit how many people need to be "in the office," even as companies reopen. Additionally, some major firms have also moved out of those states— with employees often following—in search of lower tax costs. Homes in states with lower costs are often selling above list price, according to Tessar. "As soon as people move out, other people are moving in." However, not all of the movement is to the South. Many investors are finding good value in areas of Pennsylvania, Tessar said. "ere's still a tremendous amount of dinged- up real estate that was taken back by the banks in the financial crisis." Some of those single-family properties are in disrepair to the point that they don't qualify for traditional financing, but companies like Civic, which specializes in the business loan purpose (BPL) arena, can provide interim financing for an investor to purchase the property, bring it up to code, and then resell it or then be able to qualify for conventional financing to live in it or rent it out. Regardless of the region, quality schools have been the top determining factor as to the community where younger families will rent, Tessar said. However, this could be changing somewhat as more private school options emerge, meaning a family isn't as tied to a certain public school district. "A lot of people are starting to rent within the area that they want to live, but then picking up an investment property more on the outskirts where, where they might be able to get a decent yield," Tamulevich said. "We saw the mass exodus of people from cities to the suburbs during the height of the pandemic, which caused a greater need for rentals," Tesch noted. "We are seeing many young families looking to move out to the suburbs, but they are struggling because of lack of inventory and higher home prices, so affordability has become a concern. We're also seeing other demographics starting to join the mix of folks that are driving rental demand. It's pretty common now to see younger baby boomers, people in their late 50s, early 60s, looking to downsize and sell their homes at the height of the market, so renting is very attractive for that group as well." Tesch listed Texas markets such as Dallas- Fort Worth and San Antonio as strong SFR areas, as well as parts of the Midwest such as Milwaukee, Cleveland, Indianapolis, Indiana, and Columbus, Ohio. Pittsburgh, Pennsylvania, and Evansville, Indiana, are two other good markets, according to Tenenbaum, who added that the middle-market, B- and C-class properties tend to offer the best value for single-family home investors. Pintar pointed to Austin (as did many others); Charlotte, North Carolina; Salt Lake City; several communities throughout Florida; Las Vegas; Phoenix; and, surprisingly, Bozeman, Montana, as dynamic communities that are also popular markets for SFR. Indianapolis, Indiana, has also proven to be a strong single-family home rental market. Regardless of the municipality, the Class A properties tend to be too expensive to earn a decent return, Tenenbaum explained. While some investors will look at price first and purchase Class D properties, that can be Cover Story By: Phil Britt "The propensity for a tenant to renew their lease has significantly gone up. Typically, we would average in the 60% range for the tenants that are going to renew. Now, we're in the mid-to-high 70s, with another 10% going month to month." —Mike Tamulevich, President, National Brokerage, Marketplace Homes

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