With their relatively low rent, two- to four-unit properties provide important affordable housing for low- to moderate-income families, particular in high-cost cities. Of the 43 million renter-occupied housing units throughout the U.S., about 7.7 million are in two- to four-unit structures, contributing nearly 18% to the nation’s entire renter-occupied housing stock. Renters of two- to four-unit properties paid a total of $7.6 billion in aggregate gross rent in 2017 (or, 16% of total gross rent payments), trailing only behind the single-family and 5- to 19-unit multifamily rentals. See Figures 1a and 1b. Their larger share in aggregate rental housing stock than in aggregate rent payment (i.e., 18% versus 16%) underscores greater affordability than other rental structures.
Despite contributing sizably to the nation’s affordable housing, these small income properties often receive no separate coverage -either too small to be considered in the multifamily sector, or otherwise aggregated together with the larger single-family rentals.
An analysis of CoreLogic’s public records data shows that sales of two- to four-unit properties are at new highs since the Great Recession. See Figures 2a and 2b. In 2018, there were nearly 74,000 purchase transactions of two- to four-unit properties, up 2.2% from a year ago. Sales growth has notably moderated since 2016, however. In March 2019, median sales price was $299,000, up 1.3% from February 2019. On a year over year basis, median price nationwide is relatively flat from the same period a year ago.
More than 8-in-10 two- to four-unit housing are renter occupied. It is common for owners of two- to four-unit property to occupy one unit and rent out the rest for rental income. A typical unit in two- to four-unit structure has two bedrooms with 1,000 square feet in gross living area. National median unit rent in March 2019 was $1,100, modestly more affordable than the national average of $1,250 for all single-family 2-bedroom rentals. See Figures 3a and 3b. Year-over-year rent growth in 2018 was 4.4%, outpacing a relatively flat 0.7% growth among all single-family 2-bedroom rentals. In prior years, however, unit rent growth of two- to four-unit small income properties have generally lagged the larger single-family rental market.
Last but not the least, the update would not be complete without a quick review of these small income properties’ investment value. See Figure 4. The investment value derived from rent income is conventionally indicated by the gross rent multiplier (GRM), which measures the number of years that it will take the owner/investor to recover the initial investment from the rental cash flow. In 2018, national median GRM was 11.1 years. The last few years have seen steady increases in the GRM, due to faster rising property value than rent growth. It is likely to remain at 11 to 12 years in 2019 as property appreciation is expected to slow down.
 For example, the CoreLogic Single-family Rent Index is an aggregate index of all single-family rentals, including single-family detached, single-family attached, and two- to four-unit structures.
 Only arms-length transactions are considered.
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