Buying a property to rent out so you can make some sweet side income is probably one of those ideas you've mulled over a thousand times, but haven't pulled the trigger on. That's because it's easier said than done. Buying a second home and taking on landlord responsibilities is a huge time and money commitment, and there's always the risk that you won't break even, let alone make any money.
But you could get a pretty penny back if you own and rent out a property in these cities, according to a list compiled by MarketWatch using info from Attom Data. Here's where gross rental yield (that's the annual gross rent divided by median home price) for a single-family home was in the double digits:
1. Atlanta 17.7%
2. Houston 13.5%
3. Ocala, Florida 13.1%
4. Fort Worth, Texas 12.7%
5. Tampa, Florida 11.6%
6. Austin, Texas 11.6%
7. Phoenix 11.3%
8. Miami 11.2%
9. Memphis, Tennessee 10.9%
10. Charlotte, North Carolina 10.8%
Before you go house-hunting in those cities, remember that becoming a landlord is a serious commitment. Here are a few things to keep in mind before you take the plunge.
Your finances need to be in top shape. If you already own one home, can you really afford to take on two mortgages? Do you have a well-stocked emergency fund that could cover a bum heater for both your main house and investment property? Are you on track with other big-picture goals, like retirement (and no, rental income shouldn't replace retirement savings). If the answer to any of these questions is no, you may want to reconsider.
Expect your taxes to get more complicated. Owning a rental property requires filling out additional tax forms and knowing what you can and can't write off to maintain your investment. If you've never used a tax professional before, this might be the time to start, because your paperwork and receipt-gathering is going to ramp up big-time.
Managing tenants is a big commitment. Finding financially stable tenants every year or two? Repairs? Maintaining the grounds? That's all your responsibility. If you can't be bothered with those duties — or don't have the cash on hand to hire someone to take care of those tasks for you — then you should probably ditch the landlord fantasy altogether.