Zillow has updated its Rent Zestimate tool in order to to help homeowners better understand what they could potentially earn by renting out their home, the company announced on Monday. The announcement follows Zillow’s previous announcement in June that it had updated its Zestimate tool for home property valuations with a tech upgrade that reduced the tool’s median error rate.
Zillow’s Rent Zestimate creates an estimate of a property’s anticipated rental income, based on factors like square footage, number of bedrooms and bathrooms, whether or not it has air conditioning and public data about sale price.
The refreshed Rent Zestimate has a 5 percent greater accuracy rate than its previous rendition, according to Zillow. Property owners can now also update their home facts and view similar homes used to generate the Rent Zestimate on their own home. The online real estate marketplace currently has data on over 168 million homes and a Rent Zestimate for 115 million of those properties.
“Single-family homes comprise about one-third of the nation’s total rental stock,” Zillow Economist Alexandra Lee said in a statement. “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.”
Zillow also now has a Rental Property Calculator, which helps property owners determine at what point they can break even from a purchase, and at what point a property will begin to pay itself off. The calculator takes into account property price, anticipated future home appreciation, expected rental income, mortgage rates, and other factors to help a property owner determine whether or not a home purchase makes sense as an investment for rental income.
Thirty-three out of the 50 largest U.S. metros have typical rents that are higher than the typical monthly mortgage payment (including insurance and taxes), according to the Zillow Observed Rent Index (ZORI) and the Zillow Home Value Index (ZHVI). That means that property owners in many places in the U.S. stand to profit from renting their home out, especially in the Midwest and coastal South.
In Memphis, for instance, where the greatest profits are to be had, the typical July rent is $1,504, but typical monthly mortgage payments are only $948. That means, property owners can make a $556 profit during that month. The next highest profit potential from renting out a home was in Miami, whether the difference between rent and mortgage payments was $522. In Atlanta, the difference between monthly rent and mortgage payments was $424.
“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,” Amanda Pendleton, a Zillow home trends expert, said in Zillow’s report.
In the current economic environment where most workers have the opportunity to work remotely, temporarily renting in a different city is also very feasible. Fifty-two percent of U.S. workers have at least partially remote jobs, and 33 percent of U.S. workers have a fully remote job, according to a Gallup poll published in May.