Manhattan Tops Nationwide List for Worst Rental Returns

Cash-flowing rental properties allow owners to build wealth over the long term in the form of an appreciating asset while also generating monthly income. RealtyTrac recently performed a nationwide analysis of rental returns for each county. It calculated the gross rental yield by taking the 2014 fair-market rent for a three-bedroom home multiplied by 12 (months) and then dividing that 12-month total by the median sales price of residential properties in the county.

According to the report, in Manhattan, where the population is 1,596,735, there are 846,819 housing units, and the median sales price is $887,000. The average fair-market rent for a three-bedroom home, though, is $1,852/month, making the annual gross yield percentage for the landlord 3 percent.

Not far behind is Brooklyn, in the number four spot, where the population is 2,512,740; there are 998,773 housing units; and the median sales price is $573,000. The average fair-market rent for a three-bedroom home is consistent with Manhattan's, at $1,852/month, which means the annual gross yield percentage for the landlord is 4 percent.

Queens ranks 16th on the list of worst places for rental returns. The borough has apopulation of 2,235,008 and 836,722 housing units. It has a median sales price of $445,000, and the same average rent of $1,852, which all leads to a 5 percent annual gross yield percentage.

The 16 best U.S. cities for rental returns have yield ranges from 18 to 30 percent.