Sizes of Rental Units in the US

I previously talked about ownership of rental properties.    A lot of the single family home rentals are owned by individuals and most large complexes are owned by some sort of business entity.   

I decided to look at how the rental housing in the US is made up as far as the size of the rental units.  Do most people live in large complexes, single homes or duplexes or a mixture?

I got the data from 2015 Rental Housing Finance Survey

Here's the graphic :

And the figures in a table :

Number of Units on Property1	47,543
1 unit	19,283
2 to 4 units	6,523
5 to 24 units	4,938
25 to 49 units	4,081
50 to 99 units	3,249
100 to 149 units	1,908
150 units or more	7,561

A large % of rentals at 40% are single family homes.      The majority of rental units, 54%, are in 1-4 unit buildings.    20% of rental units are in large buildings and complexes of 100 units or more.


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Institutional vs Individual Ownership of Rental Properties

Most single family and 2-4 unit rentals are owned by individuals rather than businesses.

I found the New York Times article "Mom and Pop Own Fewer Rental Units" from last summer and they had data for 2001 and 2015.    Here's a graphic from that article :

Source: New York Times

The chart shows the % of each rental size category that is owned by an "institutional investor".   
They list the 2015 Rental Housing Finance Survey as their source for the numbers.    Looking further into that data I find that they break down ownership into categories of "Individual Investor" and several different kind of business entities.   The lists includes : Trustee for estate,    LLP, LP or LLC ,    Tenant in common,    General partnership,    Real Estate Investment Trust (REIT), Real estate corporation,   Housing cooperative organization, Nonprofit organization,Other and Not reported.     I'm not sure how they split it up.    Its unclear how they decided which of those categories are "institutional investors" and which aren't.    For example an LLC might be some big hedge fund or it might be an individual.   In any case if we just look at the "Individual Investors" and then assume that anything else isn't an individual we still see that most properties in the  1-4 unit size are owned by individuals.


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Zillow Rental Comps for October 2016

I have been doing rental comps from Craigslist and Zillow.   The most recent was April 2016.
However right now I'm not able to get Craigslist to give me total numbers for the rentals listed on the map view with consistency and because of that its not practical to try and find medians in my old method.  So I'm just doing Zillow comps for now.

Here are the Zestimate figures :

	A	B	E
Jan-16	$1,500	$1,400	$1,675
Apr-16	$1,600	$1,300	$1,750
Oct-16	$1,600	$1,450	$1,695

Zillow also tracks a range of rents with a low and high estimate.

here are the current figures including the low and high of the ranges:

Zillow	min	med	max
A	$1,500	$1,600	$1,900
B	$1,200	$1,450	$1,600
E	$1,600	$1,695	$1,800

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Using Zillow to Measure Rental Demand

Our local rental market is pretty hot right now.   But I wouldn't necessarily realize that if I didn't list a property for rent and then get a flood of applicants.    I've found one way you can get a measure of the kind of rental demand you might see for a property using a figure Zillow estimates.   The figure is called the 'rental views' and is their estimate of the number of people who will view a rental ad for the property in question.   Here is how to find their 'rental views':

1. Log into Zillow.  If you don't have an account you'll need to make one.
2. Find your property and claim it as yours if you haven't already.
3. Then when you open the property you'll get the 'Owners view' initially by default rather than the standard 'Public view'
5. If you scroll down on the owners view there is a bit with some info on selling your home.   There you will find forecasts on the number of views of the home that Zillow expects you'd get if you listed it for sale or put it up for rent.    It looks like this :

That number in the middle there 220 is the number we're looking for.

Not all properties have this number and I'm not entirely sure why some do and some don't.    I have another property that has a 'rental views' estimate over 1000.    Thats the hottest market I've got a rental in and when I list that property for rent I have to screen dozens and dozens of people.      The rental with 220 is still pretty good demand market but not nearly as hot.

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Q2 2016 Rental Vacancy Rates by City

The US Census tracks rental vacancy rates in major metropolitan areas.  

Note the margin of error is pretty high.   On that they say:

"1. A margin of error is a measure of an estimate’s reliability. The larger the margin of error in relation to the size of the estimate, the less reliable the estimate. This number, when added to and subtracted from the estimate, forms the 90 percent confidence interval. "

So then I read that to mean that for Akron with a vacancy rate of 10.9 and a margin of error of 10.9 that they say they have a 90% confidence that the vacancy rate is 0 - 21.8%.      Thats kind of meaningless.   But for other markets the range is a lot more narrow.   For example Boston is 3.4% with a margin of error of +/- 1.6% so they have 90% confidence the vacancy rate is 1.8% - 5%.

Here is a big list :

Metropolitan Statistical Area	Second         Quarter       2016	Margin of Error
Akron, OH	10.9	10.9
Albany-Schenectady-Troy, NY .	3.3	4.6
Albuquerque, NM...	5.9	3.3
Allentown-Bethlehem-Easton, PA-NJ..	2.6	4.9
Atlanta-Sandy Springs-Roswell, GA\1	7.6	2.8
Austin-Round Rock, TX.	4.9	3.6
Baltimore-Columbia-Towson, MD\2.	6.6	4.1
Baton Rouge, LA	6.4	4.4
Birmingham-Hoover, AL..	14.4	6.6
Boston-Cambridge-Newton, MA-NH\3...	3.4	1.6
Bridgeport-Stamford-Norwalk, CT.	8.7	6.7
Buffalo-Cheektowaga-Niagara Falls, NY\4...	10.9	6.4
Cape Coral-Fort Myers, FL...	7.4	9.7
Charleston-North Charleston-Summerville, SC	15.8	8.6
Charlotte-Concord-Gastonia, NC-SC\5...	6.9	4.5
Chicago-Naperville-Elgin, IL-IN-WI\6	5.3	1.8
Cincinnati, OH-KY-IN\7	9.5	5.4
Cleveland-Elyria, OH\8..	6.8	4.4
Columbia, SC	3.7	4.3
Columbus, OH	5.6	3.8
Dallas-Ft. Worth-Arlington, TX...	5.7	2.1
Dayton, OH...	5.8	7.4
Denver-Aurora-Lakewood, CO\9...	5.2	3.2
Detroit-Warren-Dearborn, MI\10	7.0	3.4
Fresno, CA	0.0	0.0
Grand Rapids-Wyoming, MI	3.5	5.6
Greensboro-High Point, NC	19.9	11.6
Hartford-West Hartford-East Hartford, CT	5.7	4.8
Houston-The Woodlands-Sugar Land, TX\11	8.2	2.7
Indianapolis-Carmel-Anderson, IN\12.	6.2	4.2
Jacksonville, FL..	7.2	5.0
Kansas City, MO-KS.	12.1	5.4
Knoxville, TN.	5.8	5.7
Las Vegas-Henderson-Paradise, NV\13..	9.3	3.0
Little Rock-North Little Rock-Conway, AR..	11.3	5.5
Los Angeles-Long Beach-Anaheim, CA\14...	3.2	1.1
Louisville/Jefferson County, KY-IN\15..	6.6	5.1
Memphis, TN-AR-MS.	8.4	4.9
Miami-Fort Lauderdale-West Palm Beach, FL\16	6.8	2.5
Milwaukee-Waukesha-West Allis, WI	5.5	4.1
Minneapolis-St. Paul-Bloomington, MN-WI ...	5.2	3.3
Nashville-Davidson-Murfreesboro-Franklin, TN\17	4.5	3.4
New Haven-Milford, CT..	6.8	5.5
New Orleans-Metairie, LA.\18	11.4	4.4
New York-Newark-Jersey City, NY-NJ-PA\19...	4.9	1.1
North Port-Bradenton-Sarasota, FL...	16.8	14.7
Oklahoma City, OK.	11.2	5.0
Omaha-Council Bluffs, NE-IA	3.9	3.3
Orlando-Kissimmee-Sanford, FL\20	7.6	4.1
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD\21 .	5.9	2.6
Phoenix-Mesa-Scottsdale, AZ...	6.0	2.8
Pittsburgh, PA.	7.7	4.8
Portland-Vancouver-Hillsboro, OR-WA\22..	4.9	2.7
Providence-Warwick, RI-MA\23.	2.5	1.4
Raleigh, NC\24	4.4	5.0
Richmond, VA.	4.4	4.6
Riverside-San Bernardino-Ontario, CA..	6.0	3.0
Rochester, NY...	3.5	4.5
Sacramento-Roseville-Arden-Arcade, CA\25	8.2	4.5
St. Louis, MO-IL..	5.5	3.4
Salt Lake City, UT	5.6	3.8
San Antonio-New Braunfels, TX\26...	7.2	4.1
San Diego-Carlsbad, CA\27.	1.4	1.5
San Francisco-Oakland-Hayward, CA\28	3.1	1.9
San Jose-Sunnyvale-Santa Clara, CA...	4.2	3.3
Seattle-Tacoma-Bellevue, WA	2.7	1.9
Syracuse, NY	6.6	7.4
Tampa-St. Petersburg-Clearwater, FL..	5.9	3.3
Toledo, OH	5.7	7.1
Tucson, AZ ..	11.5	6.9
Tulsa, OK	4.7	4.4
Urban Honolulu, HI\29..	10.1	3.4
Virginia Beach-Norfolk-Newport News, VA-NC\30...	5.2	4.1
Washington-Arlington-Alexandria, DC-VA-MD-WV..	5.5	2.4
Worcester, MA.	3.2	3.8

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Rental Sale Tax Calculator

I found a calculator that figures your tax bill between capital gains, depreciation recapture and medicare tax :

Capital Gain Tax Calculation

Use it for estimation purposes only.

The calculator is hosted by Asset Preservation Inc. who handles 1031 exchanges.     I am not a CPA or anything and I can't attest to the 100% accuracy of the calculator but it looks correct to me.    


We've got a rental property for which my initial investment was about $50,000.   If I sold that property today for $55,000  then my tax bill would be about $4750.   Huh?    Yeah.   Taxes would eat up almost my entire gain.   If our income was significantly higher we'd get hit with the new 3.8% Medicare tax and the bill would be $5548.    I could theoretically have a tax bill that eats up over 100% of our gains.   Yikes!     Well almost all of that is due to depreciation recapture.   I've owned that property for over a decade and would have to repay the depreciation at 25%.   That alone accounts for ~$4500 in taxes.   Remember folks that depreciation on rentals is really just tax deferral.

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Craigslist & Zillow Rental Comps for April 2016

About 3 months ago I posted my Craigslist & Zillow Rental Comps for January 2016.    That was the first time doing comps using Craigslist.org and Zillow.com   Previously I was using Rentometer but I decided to abandon them because their data wasn't being updated properly.    Since its been about 3 months I went out and checked the figures again.

Here are the Zillow Rent Zestimate figures :

	A	B	E
Jan-16	$1,500	$1,400	$1,675
Apr-16	$1,600	$1,300	$1,750

The Craigslist median rents are :

	A	B	C	D	E
Jan-16	$2,000	$1,450	$620	$700	$2,200
Apr-16	$1,800	$1,230	$650	$825	$1,830

And the bottom 10% rents are at :

	A	B	C	D	E
Jan-16	$1,300	$900	$525	$495	$1,500
Apr-16	$1,395	$850	$550	$575	$1,500

Some of those numbers are up or down quite a lot.   This actually makes sense for the A and E properties where rent has been going up a lot lately.      The C and D rents are up more than I'd expect in the period in question.   B is down a bit but I'm not really sure whats going on there.    I'll need to see a longer trend to have a better idea how solid these figures are.   But I believe the numbers generally.     I'm not sure if having rent to up or down $100 in just 3 months is valid but we'll see.   I could also be seeing seasonal changes in the market as well as I'd expect increases to happen more in the spring than not as housing markets heat up.

One detail I've found is that some of the very low rent figures are not valid.   In the B market I was looking at the bottom 10% figures on Craigslist and found that anything under $1000 was a suspicious listing.   Some of them were "rent to own" properties and others were "too good to be true" listings with no pictures or little actual detail.   My conclusion is that the real bottom of the market may be higher than the figures I'm finding due to the fake listings polluting the results.


For Zillow I just check the Rent Zestimate figure for the single family homes.

 Checking comps on Craigslist is much more involved. I have to pull up the housing search, center the property and search for the number of bedrooms. Then I also limit it to similar style properties (houses vs apartments) and designate if we do or don't take pets. Then I have to do a little trial and error to see where the median and bottom 10% rent levels fall. I look at the total number of properties for rent and then find the price level below which 50% and 10% of the listings fall. For example if there are 59 units then I try and find the price point where ~30 are above and blow for median and then about 6 units are below for the bottom 10%.

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Does The 1% Rental Rule Really Make Any Sense?

I'm not sure the 1% rule for rentals makes any sense.

If you aren't familiar with it, the 1% rule for rentals says simply that your rent for a rental property investment should be 1% or more of the purchase price.  So for example if the property costs $100,000 then you'd want a monthly rent of $1000 or more to pass this rule.

I have a few problems with the rule.   Mostly its applied too broadly and the exact costs differ too much for the 1% rule to really be useful.     I also don't know the origins or logic of the rule so I don't know how we could modify it to individual situations or to evolve over the years.

First big flaw I think the 1% rule has is that it is applied equally across the nation even though situations vary a lot.    For example, the property taxes and insurance rates are going to vary across the country but this is never accounted for in the 1% rule.   Here's an example of a couple houses to illustrate :

Texas :
Price $100,000
Rent : $1200
Tax : $2400
Insurance : ~$600
Tax and insurance = $3200 or 3.2%

Northwest :
Price : $100,000
Rent: $900
Tax : $1200
Insurance : ~$300
Tax and insurance = $1500 or 1.5%

The taxes and insurance alone are a $1700 annual difference or 1.7% of the purchase price.

I estimated the insurance rate for that Texas house.    But I think thats a fairly good guess.

Interest rates in 1980 were around 10%.    Today they are around 4%.   (see history of mortgage rates) If you finance the property with 25% down and a $75,000 loan then you would have been  paying $7500 a year in interest in the 80's and only $4000 a year now.   Thats a $3500 annual difference in interest you'd be paying from then to now.   Thats pretty huge.

Second, the 1% rule has been around for decades but hasn't evolved with the changes in the interest rate environment.   Interest used to be a lot higher in the past than it is today.  If it made sense to buy a house as a rental under the 1% rule in the 80's when interest was higher then it should make more sense to buy such a house today.

A house in Texas in the 80's could have had $7500 in interest costs and $3000 in tax and insurance costs for $10,500 total costs.   You'd almost have to hit the 1% rule then just to over your basic carrying costs.   You'd be a "success" with the 1% rule if you took a mere $1500 net a year.   If the house above with its $1200 rent was bought in the 80's then its net would be just $3900 after interest, tax and insurance.

Buying today in the Northwest by comparison you'd have $1500 in tax and insurance and just $3500 in interest and that $900 in rent would give you $10,800 gross for a net $5,800.   Yet this Northwest house at 0.9% rent / purchase is a failure.

If you combine the difference in interest, tax and insurance and buy in different locations in the 80's versus now then you could get :

Northwest house today :   Rent is 0.9% and nets $5800
Texas house in the 80's :  Rent is 1.2% and nets $3900

Yet the 1% rule has not changed and would have been applied the same in the 80's in Texas as it is today in the Northwest.

Third thing the 1% rule fails at is accounting for any other costs.    What if your rental has a HOA fee and it requires you to pay the water, garbage and heat?    Where does that money come in versus a property with no HOA where the tenant pays all utilities?     I have a single family home where I pay no utilities so those costs for me are $0.   My dad has a four plex where he has to pay water, garbage and (until recently) he had to pay the heat and its not in a warm region.   My dads bills for utilities would have been running easily $300-400 a month for that property or $75-100 per tenant.  My dad changed the heat setup a few years ago so he no longer pays those utilities.    But the 1% rule would treat these properties the same and doesn't consider the different utility costs.

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Craigslist & Zillow Rental Comps for January 2016

After checking rental comps on Rentometer.com I've decided to stop using that service.   Their data seems stagnant (at least for 3 of 5 of our properties.)     I'm going to now instead use Zillow.com and Craigslist.com to check rental comps.

Here's the Zillow :

	Zestimate
A	$1,500
B	$1,400
E	$1,675

Here is Craigslist :

	sample	median	10% floor
A : 3 bed house	31	$2,000	$1,300
B : 3 bed house	59	$1,450	$900
C : 1 bed apt	87	$620	$525
D: 1 bed apt	171	$700	$495
E : 3 bed house	33	$2,200	$1,500

This is the first time I'm checking rental comp from these sources so theres no previous data to run comparisons on.

For Zillow I just check the Rent Zestimate figure for the single family homes.

Checking comps on Craigslist is much more involved.   I have to pull up the housing search, center the property and search for the number of bedrooms.   Then I also limit it to similar style properties (houses vs apartments) and designate if we do or don't take pets.   Then I have to do a little trial and error to see where the median and bottom 10% rent levels fall.  I look at the total number of properties for rent and then find the price level below which 50% and 10% of the listings fall.  For example if there are 59 units then I try and find the price point where ~30 are above and blow for median and then about 6 units are below for the bottom 10%.

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Rental Comp Data for January 2015 ... I No Longer Trust Rentometer Data

I've been tracking comp data for our rentals via Rentometer.com roughly quarterly when I remember.   I'm however now about to give up on Rentometer.    The last time I checked was August and the data I looked up today is completely unchanged for 3 of our 5 properties.

Here's the January 2016 data :

	A	B	C	D	E
	2bed	3bed	1bed	1bed	3bed
	house	house	apt	apt	house
10%	$766	$766	$374	$409	$1,014
20%	$865	$847	$411	$450	$1,099
median	$1,000	$976	$490	$565	$1,225
80%	$1,245	$1,153	$555	$609	$1,424
90%	$1,345	$1,233	$592	$650	$1,509
# prop	34	35	34	35	35
dist	0.5	1.3	0.9	1.8	0.4

Properties A, C & E are exactly the same in all points compared to August and that can't be valid.   I know for a fact that rents for the areas that A & E are in are going up pretty fast.


I'll probably switch to using Zillow.com and/or Craigslist..com    Zillow just gives their Rent Zestimate which is just a single dollar estimate of rental value.   But it doesn't seem to handle the mult-plex properties too well since it doesn't seem to cite rents for individual apartments.   It works well enough for the single family homes though.

Zestimate numbers today for the SFH are :

	Zestimate
A	$1,500
B	$1,400
E	$1,675

Plus I can get a lot better filtering on Craigslist so it will be better.    It takes a lot longer to do such comp checks on Craigslist however which is why I've liked to use the simple / easy test on Rentometer.


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Rental Comp Data for August 2015

I last did rental comps in May 2015.

It seems rents haven't changed much at all for our properties in the past 3 months.
Unless rentometer is broken or something.

	A	B	C	D	E
	3bed	3bed	1bed	1bed	3bed
	house	house	apt	apt	house
10%	$766	$731	$374	$403	$1,014
20%	$865	$812	$411	$444	$1,099
median	$1,000	$975	$490	$540	$1,225
80%	$1,245	$1,117	$555	$600	$1,424
90%	$1,345	$1,197	$592	$641	$1,509
# prop	34	35	34	35	35
dist	0.5	1.1	0.9	1.8	0.4

And the changes over time:

	A	B	C	D	E
Nov-11	$895	$875	$495	$495	$1,095
Jan-13	$900	$995	$510	$460
Aug-13	$905	$925	$500	$480	$1,095
Feb-14	$985	$900	$485	$478	$1,097
Aug-14	$950	$1,025	$485	$565	$1,195
May-15	$995	$975	$490	$540	$1,225
Aug-15	$1,000	$975	$490	$540	$1,225
YOY	5.3%	-4.9%	1.0%	-4.4%	2.5%

This time I just figured the year over year (YOY) difference between August 2014 and August 2015.

I'm starting to trust the usefulness of the Rentometer data less and less.    I did a quick search in Craigslist for 3 bedroom houses in the area for property E and I couldn't find anything at all comparable under $1400.   Hard to believe the median is just $1225 like Rentometer says.   I assume this is because Rentometer doesn't differentiate between houses and apartments.  But even if I broaden the search to all 3 bedrooms including apartments, condos, etc then I still dont' see properties under $1200 level.     The rent Zestimate from Zillow is over $1500 for the E house which seems a lot more in line with what I'm seeing in the active market on Craigslist.


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Rental Comp Data for May 2015

I haven't done rental comps since August 2014. 


Here is the data from rentometer.com :

	A	B	C	D	E
	3bed	3bed	1bed	1bed	3bed
	house	house	apt	apt	house
10%	$753	$731	$374	$403	$1,014
20%	$844	$812	$411	$444	$1,100
median	$995	$975	$490	$540	$1,225
80%	$1,192	$1,117	$555	$600	$1,425
90%	$1,284	$1,197	$592	$641	$1,510
# prop	34	35	34	35	35
dist	0.5	1.1	0.9	1.8	0.4

and the trends are below :

 

	A	B	C	D	E
Nov-11	$895	$875	$495	$495	$1,095
Jan-13	$900	$995	$510	$460
Aug-13	$905	$925	$500	$480	$1,095
Feb-14	$985	$900	$485	$478	$1,097
Aug-14	$950	$1,025	$485	$565	$1,195
May-15	$995	$975	$490	$540	$1,225
	4.7%	-4.9%	1.0%	-4.4%	2.5%

and a graphic of the trend :

Lastly, I figured the compound growth over the 3.5 years that I've been tracking :

A	3.1%
B	3.1%
C	-0.3%
D	2.5%
E	3.3%

If I sum the rents and look at the CAGR of the sum then that comes out to 2.7%.

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Is the Extra Work From Owning a Rental Worth it Versus Buying a REIT?

My rental investments have performed better than simply buying a REIT index.    I estimated this a while ago and its held true.  But if I were to just buy a REIT instead it would be easier and take less of my time.   Whether or not its worth it to spend the extra time to directly own and manage properties versus just buying a REIT depends on their relative investment performance and the amount of work I put into the rentals.

I've previously estimated that it takes about 1 hour a week to handle a single rental.    That adds up to 52 hours a year.    If I were to handle 40 rental units then it would amount to a full time job.   I'd certainly want my return per hour to amount to a decent wage.

One property we bought in 2006 and jointly own with my father.    If I add up all the rent we've made on that unit and the current market value of the property I've seen a 100% return on my initial investment over the 9 year period.

If I had simply bought the Vanguard REIT index (VNQ) then the cumulative dividends and current REIT value would be about 44% increase.

I can figure the amount I've made per hour worked on the rental versus just buying a REIT by subtracting the gain on the REIT from the gain on the rental and then dividing by the hours worked.   Doing this I come out with about $33 per hour worked before taxes.   Thats a pretty good wage.

There is however more risk in owning the individual property versus the REIT.

In this case the rental has been worth it as far as $33 /hr being a decent return on my labor.   But if I can find better things to do with my time to net $33/hr then I'd probably be better of just buying a REIT and putting my time elsewhere.  

What if I'd instead hired a property manager to do all the work?    That would have cut the hours I spent considerably but also reduced the profitability of the rental.       I figure that if I'd had a property manager running the rental then my return would be about 85% on my initial investment but my return per hour of my personal time would be more like $200/hr.

Here is how the options compare :

REIT : 4.6% return and no work
Rental ran  personally : 8% return or $33/hr of work
Rental handled by a property manager : 7% return or $200/hr worked

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How Much Work Are Rentals?

Rentals are not truly a passive investment.  Owning and running rental properties requires work on your part.   You can minimize the amount of work you do by hiring people to do everything possible.  Or you can save money and do everything yourself.    Clearly then the amount of time you put into a rental is something you can control yourself at least to some degree.

For our properties we've done a mix of everything as far as the level of work we put in.    Some of our properties are in other states and we don't manage them directly.    I bought a couple properties with my parents and my dad now runs those for us.    Another house we own was my wifes old house in another state she used to live in and we have a  property manager that runs that one for us.    The other rentals we have are local and we do all the work on those ourselves.    I've also seen my dad run properties for a few decades now.  He has multiple rentals including mostly mult-unit properties.  

My rough estimate is that on average a single rental is likely to take about 1 hour a week of your time if you run the property yourself.   

Some of that work is collecting rent regularly, some of it is handling random repair needs, you'll have to spend some time doing paperwork and taxes, and then a large chunk of the work will revolve around handling vacancies and turnover.

My 1 hour per week estimate is a gross average based on my opinion and experiences.   There are going to be huge variations in the amount of work required for rentals.    You might spend 10% of that or you might spend 5 times as much.  

Work on rentals varies considerably over time.     For long periods you may do nothing at all on a rental except collect your monthly rent check.   Consider yourself lucky if that lasts.  Eventually there will be a problem that needs repair or a late rent payment you need to chase.   Then sooner or later you'll have to handle a vacancy and all the work that goes into that.

How you do things will impact the amount of work that rentals take as well.    I'm not talking about hiring people versus doing every bit of work yourself.  Instead I'm talking about how you manage your time and what you decide to do for the rentals.   Consider something simple like collecting the rent.   A landlord could decide to visit every tenant in person on the 1st of the month to collect rent in person.   Or you could just have tenants mail you a check which you then deposit in the bank.    Or you could even have them deposit the rent payments directly into your bank.   Comparing these possible options you'd look at anywhere from a 1 hour round trip to do it in person to virtually zero time spent with an electronic payment.   There are various examples of how you might spend more or less time working on your rentals based on how you do things.  

The amount of work will also vary depending on your experience level.   Generally the first time you do something it will be new to you and likely take you longer.   Then the next time and subsequent times you do the task it will be easier and quicker. 

The nature of the rentals themselves and the kinds of tenants you have will also impact the amount of work you have to do.   Less expensive apartments are likely to have more turnover and thus be more work than a larger single family home.    Lower income tenants are also likely to have more turnover than higher income tenants.   Of course these kinds of things are broad generalizations but on average I'd expect lower rent properties to have more mobile tenants.     Older or poorly maintained buildings are going to experience more frequent failures and need repair more often.  

If you hire a property manager then the amount of work required will be significantly lower.   I'd estimate that to be more like 1 hour a month.    A lot of that is overhead involved in doing your own paper work and simply occasional discussions with the property manager to approve repairs or similar.


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Appreciation Rate of Our Rental Properties at ~3%

Part of rental investing is property appreciation.   You don't want to count on appreciation too heavily but you can certainly benefit from it.   Generally I expect real estate to appreciate roughly 3% annually long term.   Of course that varies a lot from location to location and region to region but overall I think 3% is a decent baseline.    As it turns out our rentals have appreciated about 3% total thus far.

I pulled price values off of Zillow and also referred to the site to get our original purchase dates and years.   Using that I figured our current growth rate on the properties values:

Here's the table :

	paid	Zestimate	CAGR
2002	$45,000	$127,000	8.3%
2006	$95,000	$151,000	5.3%
1999	$141,500	$219,700	2.8%
2002	$134,000	$209,000	3.5%
2003	$166,000	$137,000	-1.6%

4 of our properties are up in value and one has lost value.    The cheaper two properties are up significantly more.   The other two properties are up 2-3% range.

If I sum up the total amount paid versus the total current value and then use 2002 as a rough average purchase date then the growth comes out to 2.9% for the lot.


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Property Tax Trends For Our Rentals

Property taxes are one of the larger expenses for our rental properties.    Our largest expense is mortgage interest but property tax is the 2nd largest regular expense.     The taxes generally go up over time but they have gone down on occasion.   The taxes go up due to new levy spending being voted in or due to the property appreciating in value.   They might go down if a older levy expires and isn't replaced or if the property assessment is dropped.

I can pull the property tax records off of Zillow.   They get it out of public records apparently.

Property A & D are in the same state & region, property B& C are in another city in another state and property E is in yet another state.   Property E saw our taxes go up significantly in 2010 because a homestead exemption expired which happened after my wife moved out of the house and we turned it into a rental.    After that values dropped due to property value assessments in the area going down.

The cumulative annual growth of the taxes has been :

A	4.1%
B	1.8%
C	1.7%
D	3.1%
E	1.3%

Now the historical pattern doesn't really mean all that much here.    Any given year a city might vote in a really big school bond and I might see my taxes go up 5 or 10% because of it.    The taxes are also tied to property value so if values go up then my taxes go up.   How our property taxes will change in the future years depends on local votes on spending and property values.

But without any other information I'd expect our taxes to go up at rates similar to what I've seen in previous years.   So I think that figuring for roughly 3-4% annual increases in taxes as a baseline is fairly safe assumption.
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Estimating Rental Investment Returns per Major Metropolitain Areas

The kind of return you can get from a rental property varies a lot based on the local real estate market.   I figured I could use average rents and median home values to give a crude estimate of the approximate rental returns for a given area.  This isn't precise though since the median home will have different characteristics than the average rental.   The home is likely to be larger and have more amenities, etc than a average rental.   But for my purposes of giving a rough gauge of the returns for a rental market, I think it is good enough.


To give a single data point on how the table below might compare to actual property values and rents I decided to look at Vegas.  I pulled up Zillow and searched for houses in Las Vegas from $100-$125k and found a house for $105k with 3 bed/3bath.  Zillow estimates the rent would be $1020.    I then checked Craigslist and searched for 3 bed rentals under $1200 and found a couple houses with 3 beds for $1000 and $1100.    These figures compare to the median home values of $124k and average rent of $957 in the table.  Also of course what I'm looking at on Zillow and Craigslist is in 2014 versus the data below in the tables being from 2011. 

The table below lists the median home values in $1000, monthly rental costs and then the return rate calculated based on simply 12 months of rent / median house costs.   All the figures below are from 2011 as thats the latest I found all the data available.

Metro	Home	Rent	Return
Atlanta-Sandy Springs-Marietta, GA	98.6	914	11.1%
Austin-Round Rock, TX	193.1	930	5.8%
Baltimore-Towson, MD	230.0	1073	5.6%
Birmingham-Hoover, AL	139.8	753	6.5%
Boston-Cambridge-Quincy, MA-NH	346.2	1163	4.0%
Buffalo-Niagara Falls, NY	119.2	682	6.9%
Charlotte-Gastonia-Concord, NC-SC	148.9	820	6.6%
Chicago-Naperville-Joliet, IL	176.5	928	6.3%
Cincinnati-Middletown, OH-KY-IN	122.3	711	7.0%
Cleveland-Elyria-Mentor, OH	105.1	712	8.1%
Columbus, OH	123.9	776	7.5%
Dallas-Fort Worth-Arlington, TX	148.9	863	7.0%
Denver-Aurora, CO	231.4	920	4.8%
Detroit-Warren-Livonia, MI	53.8	805	18.0%
Hartford-West Hartford-East Hartford, CT	227.6	962	5.1%
Houston-Baytown-Sugar Land, TX	155.7	849	6.5%
Indianapolis, IN	123.9	764	7.4%
Jacksonville, FL	123.6	940	9.1%
Kansas City, MO-KS	133.2	798	7.2%
Las Vegas-Paradise, NV	124.7	957	9.2%
Los Angeles-Long Beach-Santa Ana, CA	307.7	1214	4.7%
Louisville, KY-IN	130.4	696	6.4%
Memphis, TN-MS-AR	112.3	805	8.6%
Miami-Fort Lauderdale-Miami Beach, FL	181.1	1078	7.1%
Milwaukee-Waukesha-West Allis, WI	185.2	785	5.1%
Minneapolis-St. Paul-Bloomington, MN-WI	154.7	858	6.7%
Nashville-Davidson--Murfreesboro, TN	151.9	800	6.3%
New Orleans-Metairie-Kenner, LA	153.0	886	6.9%
New York-Northern New Jersey-Long Island, NY-NJ-PA	378.7	1187	3.8%
Oklahoma City, OK	141.6	731	6.2%
Orlando, FL	124.9	970	9.3%
Philadelphia-Camden-Wilmington, PA-NJ-DE-MD	210.1	957	5.5%
Phoenix-Mesa-Scottsdale, AZ	115.5	893	9.3%
Portland-Vancouver-Beaverton, OR-WA	219.5	906	5.0%
Providence-New Bedford-Fall River, RI-MA	217.2	849	4.7%
Raleigh-Cary, NC	185.2	828	5.4%
Richmond, VA	187.1	925	5.9%
Riverside-San Bernardino-Ontario, CA	172.3	1076	7.5%
Sacramento--Arden-Arcade--Roseville, CA	166.1	1004	7.3%
Saint Louis, MO-IL	121.8	776	7.6%
Salt Lake City, UT	182.2	859	5.7%
San Antonio, TX	152.5	907	7.1%
San Diego-Carlsbad-San Marcos, CA	370.3	1237	4.0%
San Francisco-Oakland-Fremont, CA	483.4	1345	3.3%
San Jose-Sunnyvale-Santa Clara, CA	570.0	1460	3.1%
Seattle-Tacoma-Bellevue, WA	285.0	1037	4.4%
Tampa-St. Petersburg-Clearwater, FL	127.8	906	8.5%
Virginia Beach-Norfolk-Newport News, VA-NC	182.9	1053	6.9%
Washington-Arlington-Alexandria, DC-VA-MD-WV	325.4	1391	5.1%

The markets with the 10 best returns :

Metro	Home	Rent	Return
Detroit-Warren-Livonia, MI	53.8	805	18.0%
Atlanta-Sandy Springs-Marietta, GA	98.6	914	11.1%
Orlando, FL	124.9	970	9.3%
Phoenix-Mesa-Scottsdale, AZ	115.5	893	9.3%
Las Vegas-Paradise, NV	124.7	957	9.2%
Jacksonville, FL	123.6	940	9.1%
Memphis, TN-MS-AR	112.3	805	8.6%
Tampa-St. Petersburg-Clearwater, FL	127.8	906	8.5%
Cleveland-Elyria-Mentor, OH	105.1	712	8.1%
Saint Louis, MO-IL	121.8	776	7.6%

And the 10 worst:

Metro	Home	Rent	Return
San Jose-Sunnyvale-Santa Clara, CA	570.0	1460	3.1%
San Francisco-Oakland-Fremont, CA	483.4	1345	3.3%
New York-Northern New Jersey-Long Island, NY-NJ-PA	378.7	1187	3.8%
San Diego-Carlsbad-San Marcos, CA	370.3	1237	4.0%
Boston-Cambridge-Quincy, MA-NH	346.2	1163	4.0%
Seattle-Tacoma-Bellevue, WA	285.0	1037	4.4%
Providence-New Bedford-Fall River, RI-MA	217.2	849	4.7%
Los Angeles-Long Beach-Santa Ana, CA	307.7	1214	4.7%
Denver-Aurora, CO	231.4	920	4.8%
Portland-Vancouver-Beaverton, OR-WA	219.5	906	5.0%

I was going to add in the property tax rates and figure the return after accounting for average property taxes.  However I can't account for the impact of homestead exemptions so that would make that calculation kind of worthless. 

This does not account for the expenses which vary as well.  
Sources of information :
Rent  rates from the Census
Median home prices from the Realtor association

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