Your Home May be Worth More Than You Thought, as a Rental

Rhea-AI Summary

Zillow Group highlights a trend where rents in major U.S. metros surpass typical mortgage payments, making renting a viable option for homeowners. A recent report indicates that homeowners can significantly profit by renting out their properties in cities like Memphis ($556 rent-mortgage difference), Miami ($522), and Atlanta ($424). Zillow's enhanced tools, such as the Rent Zestimate, offer improved accuracy for rental pricing. This shift in the real estate market, driven by remote work, presents new opportunities for landlords amidst recovering rent growth nationwide.

Positive

• Rents in 33 of the 50 largest U.S. metros exceed typical mortgage payments.
• Memphis leads with a $556 rent-mortgage difference, followed by Miami ($522) and Atlanta ($424).
• Zillow's Rent Zestimate tool now offers a 5% accuracy improvement, covering over 115 million homes.
• Rental Property Calculator assists landlords in evaluating investment viability.

Negative

• None.

SEATTLE, Aug. 23, 2021 /PRNewswire/ -- Memphis, Miami and Atlanta lead a host of major metros where rents are higher than typical mortgage payments, while new and improved Zillow Rental tools make it easier than ever to assess the possibility and opportunities of becoming a landlord.

The Great Reshuffling and the ability to work from home has severed or seriously stretched the commute for millions of Americans and opened up new opportunities for them to live where they've always dreamed. A recent Gallup poll found 52% of U.S. workers are in at least partially remote jobs, while 33% are fully remote. 

"For homeowners looking to explore life in a top metro for digital nomads or favorite vacation town without selling their current house, renting can open the door," said Amanda Pendleton, Zillow home trends expert. 

Of the 50 largest U.S. metros, 33 have typical rents that are higher than typical monthly mortgage payments, including insurance and taxes¹. Property owners who rent out their home for more than their monthly mortgage payments could use the difference for spending, saving or investing, all while trying out some new scenery². 

Metro areas across the Midwest and coastal South stood out, and Memphis topped the list, with typical rents at $1,504 in July and typical total monthly mortgage payments at just $948. This makes a rent-to-mortgage difference of $556 in that metro. Sunny Miami came in second with a $522 difference between rents and mortgage payments, followed by Atlanta at $424. 

Homeowners interested in renting out their property can use Zillow's improved Rent Zestimate to get a good idea of what they could potentially earn in rent. The Rent Zestimate generates a property's expected rent income by considering a home's physical attributes and amenities, including square footage, number of bedrooms and bathrooms, and whether it has air conditioning, as well as public data such as the last sale price.

This new and improved Rent Zestimate delivers a 5% improvement in accuracy over its predecessor, and now allows property owners to update their home facts and view comparable homes used to generate their Rent Zestimate. Zillow currently has data on more than 168 million homes and a Rent Zestimate on 115 million of them. 

"Single-family homes comprise about one-third of the nation's total rental stock," said Zillow economist Alexandra Lee. "Owners who do rent out their properties can provide both much-needed rental inventory in tight markets as well as sought-after space and amenities for families looking to move up from an apartment."

For those looking to invest in or turn their home into a rental property, Zillow's new Rental Property Calculator is designed to help independent landlords determine if their prospective purchase makes financial sense. The calculator factors in property price, home appreciation forecasts, expected rental income, mortgage rates and more to find when the purchase will break even and begin to pay itself off. 

According to a recent study by the Pew Research Center, seven of 10 rental properties in the U.S. are owned by individuals. These individuals typically own just one or two properties. 

Rent growth across the U.S. slowed dramatically following the coronavirus outbreak, but quickly recovered in 2021. Zillow's recent market report shows rents in July are up annually in all 50 major metros. 

Top 10 Metros for Saving Money by Renting Out Properties 

Metro Area	Size Rank	Typical Rent	Typical Monthly Mortgage Payment3	$ Difference Between Rent and Mortgage2
Memphis	41	$1,504	$948	$556
Miami	8	$2,249	$1,727	$522
Atlanta	9	$1,787	$1,363	$424
Birmingham	49	$1,271	$868	$403
Tampa	19	$1,819	$1,435	$384
Indianapolis	33	$1,375	$1,044	$331
Orlando	27	$1,758	$1,444	$314
Charlotte	24	$1,628	$1,339	$290
Oklahoma City	42	$1,210	$931	$279
Detroit	12	$1,387	$1,119	$268

¹ The Zillow Observed Rent Index (ZORI) measures changes in asking rents in rental units over time in a given region — what we call the "typical rent," while the Zillow Home Value Index (ZHVI) is a weighted average of the estimated value of the middle third of owned homes in a given region — what we call the "typical home value." Because ZHVI draws primarily from single-family homes, and those do not generally comprise the bulk of rental units, rent for a typical single-family home may not align with ZORI in a particular area.
²  Every property and market is unique. Rent income for a particular property is dependent on the local market and a multitude of individual factors.
³  Monthly mortgage payments include principal, interest, property taxes and insurance. 

About Zillow Group

Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. 

As the most visited real estate website in the United States, Zillow^® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and nearly seamless end-to-end service. Zillow Offers^® buys and sells homes directly in dozens of markets across the country, allowing sellers control over their timeline. Zillow Home Loans™, our affiliate lender, provides our customers with an easy option to get pre-approved and secure financing for their next home purchase. Zillow recently launched Zillow Homes, Inc., a licensed brokerage entity, to streamline Zillow Offers transactions.  

Zillow Group's brands, affiliates and subsidiaries include Zillow^®; Zillow Offers^®; Zillow Premier Agent^®; Zillow Home Loans™; Zillow Closing Services™; Zillow Homes, Inc.; Trulia^®; Out East^®; StreetEasy^® and HotPads^®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org). 

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SOURCE Zillow

FAQ

What are the top U.S. metros where renting is more profitable than mortgage payments?

Memphis, Miami, and Atlanta lead in profits from renting versus mortgage payments.

How does Zillow's Rent Zestimate help homeowners?

Zillow's Rent Zestimate provides an expected rental income estimate based on home attributes and local market data.

What is the rent-mortgage difference in Memphis?

In Memphis, the rent-mortgage difference is $556.

How accurate is Zillow's new Rent Zestimate tool?

The improved Rent Zestimate tool offers a 5% increase in accuracy over its predecessor.

How many homes does Zillow have data on for rental estimates?

Zillow has rental data on over 168 million homes.