Is Being a Landlord Still Profitable in Today's Market?

If you’ve been thinking about buying a rental property or turning your current home into a rental, one question probably comes to mind: Is being a landlord still profitable?

Your concerns are absolutely valid. It’s easy to feel uncertain with unpredictable home prices, fluctuating interest rates, and headlines about tenants struggling to afford rent. But the reality is, despite these ups and downs, Americans are still renting.

For real estate investors, a rental property can provide steady cash flow, tax advantages, and long-term appreciation. If you’re a homeowner, renting out your current home offers flexibility, the chance to cover your mortgage, plus the potential for passive income. Curious how real estate can work for you in today’s market? Let’s look at why rental investments continue to pay off.

Why the Rental Market Is Still Going Strong

There are approximately 44 million renter-occupied housing units in the United States. This figure has been steadily rising since 2010 and reflects a long-term upward trend dating back to 1975. This growth isn’t just a fluke; it’s driven by several key factors that keep the rental market thriving. Below, we explore why renting remains a compelling choice for so many Americans today:.

1. Homeownership Is Still Inaccessible for Many

Buying housing can be tough for many people, especially first-time buyers who are trying to break into the market. Saving up for that hefty down payment and dealing with higher mortgage rates isn’t easy, and that’s pushed a lot of people to stick with renting. Renting doesn’t require that massive upfront investment, which is why so many folks are choosing it over buying right now.

2. Uncertainty in the Job Market Leading to Preference for Renting

In today’s unpredictable job market, renting is becoming a go-to choice for many. Job stability can be elusive, and the thought of being tied down by a mortgage in uncertain times can be overwhelming. There’s also less stigma around switching careers or job hopping. Renting gives a welcome sense of freedom, allowing people to relocate for new opportunities or career changes without the hassle of selling a property.

3. High Student Debts Delaying Homeownership

Housingwire says that the heavy burden of student debt is a hurdle for many who dream of owning a home. For people juggling hefty student loan payments, a good chunk of their income goes toward paying off that debt, leaving them with less for a down payment and monthly mortgage. This situation affects their debt-to-income ratio, a key factor that lenders evaluate when considering mortgage applications. Because of this, many people with high student debts are more likely to choose renting as a more feasible housing option at the moment.

4. Millennials and Gen Z Are Renting

The majority of American renters are between 35 to 44 years old, followed by those under 29 years old. Millennials and Gen Z are shaking things up when it comes to traditional life paths. Many of them are delaying or even skipping homeownership in favor of renting. They value the freedom to move for opportunities, whether it’s for a job in another city or to travel and explore different places. Renting makes this kind of mobility possible without the long-term commitment of a mortgage.

5. Remote Work and Mobility

The continued rise of remote work means that more people are moving to affordable locations or up-and-coming neighborhoods. This mobility boosts demand in places where housing is more affordable, yet still desirable, creating profitable opportunities for property owners who can capitalize on these migration trends.

What Are the Benefits of Owning a Rental Property?

1. Earn Extra Income

Who wouldn’t love an additional income stream? A rental property can turn that dream into reality. If you’re moving to a new city and aren’t ready to sell, renting out your current home instead of letting it sit empty could give you that financial boostor simply give you more breathing room in your budget. For investors, the extra income can help grow your portfolio and help you to reach your financial goals faster. 

2. Grow Wealth Through Property Appreciation

Over time, real estate values tend to go up, especially in key markets. While your tenants are paying rent and covering your mortgage, your property can (ideally) increase in value the longer you hold on to it. When the time comes to sell, you could be looking at a nice profit. Note that appreciation varies considerably, depending on the housing market, so it’s important to consider factors including historical housing prices before making an investment.

3. Enjoy Tax Benefits for Rental Properties

Being a landlord comes with some tax perks that a lot of people don’t realize. A range of expenses are deductible, from the mortgage interest and property taxes to maintenance and repairs costs.

Let’s say you spent $12,000 on a new roof and $2,000 on maintenance last year. These operating costs are typically tax deductible, meaning they can reduce your taxable rental income and lower your tax bill. Plus, with real estate depreciation, you may be able to write off a portion of the property’s value over time. If you’re an investor with multiple properties, these deductions can add up, making the whole venture even more profitable.

4. Have More Flexibility

Life changes fast, and rental properties can help you stay flexible. As a homeowner, renting out your place gives you the freedom to move without being tied to selling your property right away. For investors, having rental income allows you to explore new opportunities. You don’t have to leave your day job or move right next to your rental unit to run a rental successfully. With help from a professional property manager, you can manage rental properties from anywhere in the world. With a rental property generating income, you have time to pursue other interests.

5. Keep Your Property Maintained

An empty home can quickly turn into a maintenance nightmare. Think leaks, pest infestations, or the yard turning into a jungle. Renting out your home keeps it occupied and well-maintained, as tenants and property managers often help with the upkeep. Many lease agreements require tenants to handle basic maintenance, like mowing the lawn or changing the air filters, which can save you time and hassle. Just make sure you’re able to request that tenants help with maintenance, in some states landlords are required to reimburse tenants for some maintenance tasks.

6. Create Income for Retirement

For homeowners approaching retirement, renting out your home could be a smart way to generate income without dipping into your savings. If you downsize and rent out your current home, the rental income can help cover your new living expenses and even pad your retirement fund. Investors can also enjoy the same benefits of this long-term strategy and income from rental properties can support you in your retirement years.

Want to learn more about real estate investing? Discover 6 Easy Ways to Get Started in Real Estate Investing.

What Makes A Good Rental Property?

Before you start imagining those rental checks rolling in, be sure to assess whether the property has what it takes to become a standout rental. From appealing features to prime locations, some homes just have that “wow” factor that attracts tenants. 

7 Features that Give a Home Strong Rental Property Potential

1.  The Property Is Close to Universities or Colleges

• Why It Has Potential: If the property is near a university or college, you’re in a prime spot for steady rental income. University towns have a built-in demand, with students, professors, and university staff constantly seeking housing. This can mean a reliable stream of tenants year after year.

• The Upside: Besides consistent demand, you might also benefit from the academic year’s rental cycle. You can adjust rent slightly based on peak and off-peak seasons and potentially maximize your income.

2.  The PropertyIs In a Growing Urban Area

• Why It Has Potential:  Cities are on the rise, with booming job markets and expanding populations, which often means an increase in rental demand as well. As more people move in for work and lifestyle changes, they’re more likely to rent at first to test the waters. A property in such a city could attract a variety of tenants, from young professionals to families, who need a place to call home.

• The Upside:  Being in a rapidly growing area often means your property’s value is on the rise too. As the neighborhood develops, you could see increased rental income and higher property value over time.

3.  The Property Is In an Upscale or In-Demand Neighborhood

• Why It Has Potential: Homes in prestigious neighborhoods often come with higher rental demand, thanks to the allure of living in a top-rated school district or a neighborhood with boutique shops and cozy cafes. Tenants looking to rent in these areas are typically willing to pay more for the quality of life and convenience.

• The Upside:  These neighborhoods are likely to attract qualified tenants who can afford premium rents.

4.  The Property’s Location Is Close to Major Employers

• Why It Has Potential:  Properties near major employers or business districts may be highly sought after by professionals who want to minimize their commute. This means less time stuck in traffic and more time enjoying life outside of work.

• The Upside:  Besides attracting tenants who appreciate a shorter commute, you might also find that such properties have higher rental rates due to their premium location.

5.  The Property Has Unique Amenities

• Why It Has Potential:  Amenities enhance the living experience, and can also justify higher rental prices. Features like a swimming pool, modern kitchen, or expansive yard can make a property irresistible to tenants. A home with a pool, for instance, is perfect for families looking for fun and relaxation right at their doorstep.

• The Upside:  Unique features can also set your property apart from others in the market, attracting tenants who are willing to pay more for added comfort and luxury.

6.  The Property Is Recently Renovated

• Why It Has Potential:  A recently renovated home in excellent condition can command higher rents because it meets modern standards and needs. In one Forbes survey, 45% of renters said they would like their rental property to be newly built or renovated. Freshly updated kitchens, new appliances, and stylish finishes make your property more attractive and ready for immediate occupancy.

• The Upside:  Renovations often lead to higher tenant satisfaction and can reduce vacancy rates. A well-maintained property is also likely to attract and retain tenants more easily.

Here are a few of the Steps You Need to Take Before Renting Out Your Property, to help you get started today.

7.  The Property Has Easy Access to Transportation Links

• Why It Has Potential:  Easy access to buses, trains, or bike paths can be a major selling point, especially in urban areas where traffic and parking can be challenging.

• The Upside:  A property with excellent transportation links can attract a diverse range of tenants, including those who prefer not to own a car, and can often command higher rents due to the added convenience.

Final Thoughts: Why Rental Properties Remain a Smart Investment

All the factors we talked about contribute to one simple truth: the demand for rental properties is still going strong. As people seek affordability and flexibility when it comes to housing, renting continues to be a popular choice. So if you’d like to become a landlord and invest in rental real estate, there’s a good chance you’ll find eager renters who are ready to move in. Just make sure you take the time to conduct market research first so you can gauge demand for rentals in the area and get a clear idea about the type of rent that you’ll be able to charge.

A market analysis can set your rental up for success. Learn how to do one with How to Conduct a Market Analysis for Your Rental Property.Thinking about renting out your home but not sure where to start? Check out how much your home could be renting your property for with our FREE Rental Price Analysis tool.