The typical mix of rental units varies, but nationally there’s been a trend towards fewer low-cost rentals and more high-end units. Since 2012, in the U.S. market, total units renting for less than $1000 have reduced by over 6.1 million, while total units renting for at least $1400 increased by 8.4 million.

Rent increases have also been a consistent trend, although the rate of increase has slowed from the highs of previous years. Landlords have generally imposed modest annual rent hikes, reflecting the balancing act between maintaining occupancy rates and increasing revenue.

In Wisconsin, the residential real estate investment landscape presents a variety of opportunities, underscored by specific financial metrics that highlight the potential for robust returns. Currently, the Capitalization Rate (Cap Rate) for residential properties in Wisconsin can average around 7%, which aligns with national trends and reflects a healthy return on investment given the stability of the residential market. The Internal Rate of Return (IRR) for these investments generally ranges from 10% to 15%, driven by strong rental demand and strategic property improvements.

Annual Percentage Yield (APY) on these investments varies but can be significantly enhanced by leverage and efficient property management, often reaching 5% to 8%. Return on Capital (ROC) is also a critical metric, with typical values ranging from 8% to 12%, depending on the property’s operational efficiency and market location.

Tax benefits associated with real estate investment, such as deductions for mortgage interest, depreciation, and property taxes, substantially improve the effective returns. Moreover, long-term appreciation impacts the investment positively, typically seen at an annual growth rate of 3% to 5% in Wisconsin. This appreciation  accumulates wealth as the property’s market value increases over time, solidifying residential real estate’s appeal as a lucrative long-term investment strategy.