Return on Single Family Rentals

What is the total return to U.S. single family (house) rentals? In their February 2021 paper entitled “Total Returns to Single Family Rentals”, Andrew Demers and Andrea Eisfeldt analyze total returns to U.S. single family rentals, decomposed into net rental yield and house price appreciation. To estimate net rental yields, they:

• Weight city-level gross rental yields by number of rental houses in each ranked tenth (decile) of house prices to account for prevalence of low-priced houses.
• Empirically estimate rental operating and renovation costs as a fraction of home value, size or rent.
• Apply state-specific or city-specific real estate taxes and vacancy rates.

Using monthly home prices and rental estimate inputs by zip code for the 30 largest U.S. cities during 1986 through 2014, they find that: (more…)