A Zillow Rentals analysis looked at the top 50 U.S metros to determine which areas provide the best short-term return on investment for small landlords. Rental property owners in the Oklahoma City metro area can expect to profit $536 per month on the median home when comparing anticipated rental income versus their assumed monthly mortgage payment.
Mom-and-pop landlords commonly are homeowners who have turned their personal home into a rental rather than selling it when they move.
The study also named the best places for landlords interested in long-term profits. When looking at rental income, tax benefits and accumulated home equity (thanks to rapid home value appreciation), landlords in San Jose, California, make the most money: $8,927 per month, or $107,122 per year. The majority of this “profit” is derived from earned but unrealized equity distributed evenly each month over the next six years. Most, if not all, of this profit will not be realized until the landlord sells the property.
“When deciding if they should sell their home or rent it out, most mom-and-pop landlords are primarily concerned with whether or not they can cover their mortgage payment each month – they simply can’t absorb monthly losses like professional investors,” said Zillow Chief Economist Dr. Stan Humphries. “However, the greatest returns are actually in markets like San Jose and San Francisco where there are short-term monthly losses, but the long-term earned equity makes them the best markets to invest in.”
Nationally, the Zillow Rent Index has increased 2.5 percent since June 2013 and 9.1 percent since June 2011. On a local level, the Zillow Rent Index has gone up as much as two to three times that amount over the past year in rental hotspots such as metro Chicago (+6.3 percent) and San Francisco (+11 percent).
Top 10 Markets for Short-term Financial Gain
These figures were calculated by measuring the difference between rent and mortgage payment on the median home, accounting for property and income taxes, maintenance and vacancy:
Oklahoma City, Oklahoma
Miami-Fort Lauderdale, Florida
Dallas-Fort Worth, Texas
Top 10 Markets for Long-term Financial Gain
The categority includes home equity gains, tax benefits, and the difference between monthly rental income and mortgage payments after holding onto the property for six years on the median home. Also accounting for property/income taxes, maintenance and vacancy.
San Jose, California
San Francisco, California
Los Angeles, California
San Diego, California
New York, New York
More information on additional cities can be found by visiting: http://www.zillow.com/research/landlord-profit-7357/
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