Rental Income Trends Across the U.S.

Investing in commercial or residential rental real estate can be a powerful way to build long-term wealth while generating steady, passive income. The key is investing in the right property to make it worthwhile. In the U.S., there are roughly 44.1 million rental properties. Landlords and property managers also need to be aware of U.S. rental income trends so they can price units accurately while remaining competitive and adapting to market changes.

Although investing in a property with high rental income may sound promising, you must understand how to calculate rental income correctly to determine if it pans out as a good investment. The key is gross vs. net rental income.

Cash flow is the difference between rental income and the expenses you must pay on the property. Positive cash flow means that the expenses are lower than the rental income, and at the end of the month, you have money left over. The higher the cash flow, the better your return on investment (ROI) will be. Some tips for calculating rental income are as follows:

National Trends and Averages (2024-2025)

Although rents spiked during 2021-2022 (peaking at a 16% increase), trends indicate a cooling-off period after a significant growth spurt. Since 2023, year-over-year rental income has slowed slightly (to 0.4% year-over-year), and some areas have even seen declines. Due to the increases during the COVID-19 pandemic, many renters still struggle to afford homes. Rent increases are slowing, and a significantly higher number of younger renters, particularly Generation Z (30%), are entering the rental market. More people are working from home, which influences rental preferences as tenants seek dedicated workspaces within their homes.

Property owners of single-family homes can charge more for monthly rent; however, a multi-family complex typically earns more due to its multiple units. The median rent for a single-family is $2,294 and the median rent for a multi-family unit is $1,916.

Several cities in the Midwest and Sun Belt regions stand out for their high rental income rates. Detroit, Michigan, leads the pack among large cities with high rental rates but low average home prices. Other cities that follow close behind include Cleveland, New Orleans, Memphis, Baltimore, Indianapolis, Dayton, and Tampa. States that overall charge higher rents are Ohio, Florida, Texas, Georgia, and Tennessee.

Typically, urban areas command higher rental incomes than rural or suburban, due to greater demand and availability. However, urban areas also incur higher expenses, resulting in a lower net profit. Additionally, urban properties may be more limited in terms of space, offering tenants less for a higher price.

Suburban and rural areas may yield lower rates, but they enjoy greater stability and longer-term tenants. Location and property type significantly impact both the rental income amount and the property's desirability. Rural or suburban properties are often larger and less expensive to maintain.

Factors That Influence Rental Income

Many different factors related to the property influence rental income. Some of the most impactful things that affect rental income are as follows:

• Location and Demand: Properties in areas with good schools, low crime rates, access to amenities (such as shopping, dining, and public transportation), and proximity to employment centers tend to command higher rents due to limited supply and high demand, resulting in increased rental rates over the years.
• Property Size, Type and Amenities: Larger units with more bedrooms and bathrooms generally fetch higher rents, as do properties with desirable layouts. Newer or well-maintained properties can charge higher rents compared to older, poorly maintained properties. In-unit amenities, such as laundry facilities, dishwashers, and air conditioning, as well as community amenities like pools or gyms, can significantly impact rental rates. If utilities like heat, water, and electricity are included in the rent, it too can justify a higher rental price.
• Economic Conditions: Higher mortgage rates have made homeownership less accessible to many people, thus driving the demand for rentals. Inflation and interest rates have impacted both rental costs and renter affordability. Economic factors, including employment rates, income levels, and interest rates, significantly influence rental demand and pricing. For example, low interest rates from 2019 to 2021 boosted demand, while higher rates since 2022 have dampened it.
• Local Rent Control and Regulations: A strong local economy, characterized by high employment rates and rising income levels, can support higher rental rates. Regulations related to rent control and tenant-landlord relationships can impact rental income and potentially result in lower rental yields. Pandemic-era stimulus and renter protection programs initially helped keep rents lower but were followed by a period of rapid growth.
• Operating Expenses and Property Taxes: Higher operating expenses and property taxes can necessitate higher rents to cover landlord costs. Efficient property management can impact rental income by minimizing vacancies and maximizing tenant satisfaction.
• Competition: The availability of comparable rental properties in the area can influence the amount a landlord can charge.
• Tenant Profile: The type of tenants a property attracts can influence rental income. For example, a property in a family-friendly neighborhood might attract long-term tenants who are willing to pay more.

Emerging Trends or Insights

Some emerging trends in rental income include rising rental costs, increased demand for flexible lease terms, and the growing importance of digital platforms for tenant communication and management. The market is experiencing a significant influx of younger renters, resulting in increased competition and a shift toward cost-saving amenities and transparent pricing.

Due to the housing crisis (high interest rates, unaffordable house prices, and a shortage of available homes), most renters are seeking long-term rentals and view renting as a more stable housing option. Those renting short-term are typically vacationers or temporary workers. There is a significant demand for long-term rental properties at present, and this trend is expected to persist as house prices continue to rise.

Many investors are making regional shifts to the Sun Belt (e.g., Florida), where there are numerous retired renters and property is consistently in demand. Along with location changes, investors and landlords are expected to adapt to the evolving needs and preferences of renters, including offering remote work amenities and flexible rental terms.

Maintaining occupancy rates requires competitive pricing and offering attractive perks, such as flexible lease terms and other benefits. Property managers are also focusing on providing excellent tenant service, using digital marketing to find tenants, and highlighting cost-saving amenities. Neighborhoods with improving amenities, new developments, or increasing popularity are seeing higher rental rates. Factors like infrastructure improvements, decreasing crime rates, and proximity to amenities can all influence a neighborhood's desirability and rental potential.

Tips for Maximizing Rental Income

In these challenging times, investors and landlords must find ways to maximize rental income and increase profits. The most crucial focus is on maintaining a desirable property that people want to rent.

Some additional tips to maximize rental income include:

• Renovations: Some simple fixes and a fresh coat of paint can go a long way. More significant renovations mean you can charge a higher rent. Renovations are a great way to upgrade your ROI with a minimal investment that pays itself off quickly.
• Minimize Vacancies: Consider adjusting rental rates in response to seasonality, local events, and demand fluctuations. Use high-quality photos and detailed descriptions to showcase your property and target the ideal tenant demographic effectively. Consider short-term rental options, such as Airbnb, for the potential of higher income, but be aware of the associated management complexities and regulations. Thoroughly screen potential tenants to minimize risks of late payments, property damage, and evictions.
• Property Upgrades: Invest in landscaping, exterior repairs, and a well-maintained exterior to make a positive first impression. Focus on updating kitchens, bathrooms, flooring, and adding smart home features to attract and retain tenants.
• Tenant Retention Strategies: Focus on keeping good tenants by offering extra amenities like storage solutions, energy-efficient upgrades (to reduce utility costs), laundry services, a pet-friendly environment, fitness center, or a pool. Offer tenants flexible lease options and proactively address maintenance items.
• Strategic Pricing Based on Comps: Conduct thorough market research to understand what similar properties are renting for in your area.
• Stay Informed: Stay up-to-date on real estate market trends and local regulations. PropertyChecker provides an ideal platform for researching competitive rental properties within the area.