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Median Gross Rents in the U.S From 1940 to 2000

If you want to understand the long term value of buying rental properties, it helps to take a look at a long term chart of Median Gross Rents in the United States.

The median U.S. rent in 1980 was just $243. By 1990 it had almost doubled to $447. I was in my second year of college at San Diego State University in 1990. I had two college room mates, and we rented a house in Pacific Beach (on Diamond Street) from an old lady for $800 a month. She was getting old and she wanted to sell and we even discussed buying the house from her. But we never did.  Today that house on Diamond Street is worth a few million dollars.

By the year 2000, the average rent in the U.S had increased to $602.  In just 20 years, the average rent in the U.S had increased from $243 to 602. If you were a landlord and you owned that property, and you had a 15 year mortgage, your property would be owned free and clear and all that rent increase would be “cash flow”.

Today, in 2021, the average rent for a two-bedroom apartment (not house) is over $1,200. That house on Diamond Street that I rented for $800 in 1990 would now rent for over $4,000. That’s inflation. And if you have a fixed payment (or no payment because your house if paid off) then you can call that rental payment from your tenant “income”. It’s also one of the best investments during periods of inflation.

If you borrow money from a bank at low interest rates (currently rates are less than 3%), then you are able to have a fixed monthly payment on your mortgage, while your rents will constantly be increasing over time. If rents go up at just 4.8% per year, then rents will DOUBLE every 15 years. Many people find this improbable. I like to refer them to the chart at the bottom of this page to see the median rental prices in the U.S. and how they have increased over the past 60 years.

When you own a rental property , the net result to you as a real estate investor is you get cash flow and tax deductions. The fact that the property will also double in value every 15 years if prices increase at just 4.8% per year is an added bonus (and what will make you wealthy). If you add up the benefits of the positive cash flow, the tax deductions and the increase in the value of the property, you have what in my personal opinion is the best investment that there is. And that’s coming from someone who was a financial advisor for 12 years.

Landlords get wealthy over time. This is one of the main reason why the rich get richer, and the poor get poorer. Not being able to own your own home, and always being  a renter is a sure way to become poorer as the years go by. If your income is fixed, or growing at only 2% per year, and rents are growing at double that rate (or more) then you can see mathematically how that will not work for the long term.

If you are on a fixed income like retirees on social security, and you are still paying rent, you will eventually be in a situation where you can no longer afford to pay your rent. This is why you must own your own home. It’s also why the U.S Government gives so many tax deductions to home owners. They want you to buy a home. They do not want you to rent. If you are in the 35% of the U.S population that still rents, figure out how to buy a home as soon as possible. You can buy a home with just 3.5% down using the FHA Mortgage Program. I sell many of my fix and flips to first time home buyers that ask for a 3% credit. That means they are coming to the table with just 0.5% down ($500 on a $100,000 house). The reality is that almost anyone in the U.S that has a job, can purchase a home. 
Landlords that buy rental properties with a fixed rate mortgage and own them long term will become millionaires. That is a fact. The key thing is the word “long term”. If you own a rental for a few years, and decide to sell it because you have a difficult tenant, or because you have to evict someone, or pay for some repairs, then you will NOT reap the long term benefits of owning rental properties. Unfortunately this is what happens to many “newbie” real estate investors. They get shocked by the fact that tenants don’t pay, they don’t know how to screen tenants properly, and they don’t have sufficient reserves to pay for maintaining the property.
I buy houses from newbie landlords like that all the time. Most beginners think that being a landlord is all about “collecting rent checks”. The reality is that you won’t make that much money your first few years as a landlord. But you will over the long haul. You just need to be patient and think long term. When you first buy your rental property, it may barely cash flow, or may even break even (or lose money). But over time, prices will go up, rents will increase and the cash flow will become substantial. Unfortunately, most new landlords don’t wait that long and sell within their first few years of ownership. They don’t reap the long term cash flow or the long term appreciation. Watch this video on my YouTube Channel for a perspective on that.

If you are a landlord that stays for the long haul, owning rental properties over long periods of time (like I have) will make you very wealthy. Buying a rental property with a 15 year fixed rate mortgage is my recommended financing method. Many people will disagree and opt for a 30 year mortgage. But I feel that a 15 year fixed rate mortgage will “force” you to save and pay down your mortgage quicker than a 30 year fixed rate mortgage will. And in my experience with many of my students who are in their 40’s, 50’s and 60’s they need to get to financial freedom as soon as possible.

You can easily buy one or two properties a year (like many of my students have done). If you repeatedly do this, you will become a millionaire eventually. I call this “getting rich slow”. And it is the “secret” to building wealth. Buying and owning rental properties long term will make you very wealthy. Keep in mind however that we are in a relatively high point of the real estate cycle so some pull back is to be expected at some point (maybe soon if we have a foreclosure crisis).

However if you think long term (in 15 year increments) and the fact that in 15 years, your rental property will be owned free and clear, then it doesn’t really matter what prices do over the short term. As you can see on the chart at the bottom of this page, rents go up over time. There is no denying that. And if you own rental properties free and clear, then it doesn’t really matter what prices do in the short term. I consider anything less than 15 years as “short term”. To me long term is generational wealth and what my children will inherit.

For a longer term perspective on rents, see what the average (median) gross rent has been in the United States from 1940 to 2000 in the chart below.
One look at this chart below will make you realize a few things:
  1. You should not rent and should instead own where you live
  2. You should buy rental properties as soon as possible 
  3. There is never a bad time to buy rental properties if you think long term
  4. If you already have rental properties you should buy more (while rates are low)
Median Gross Rents in the United States From 1940 to 2000 (Unadjusted For Inflation)
 
                      2000    1990    1980    1970    1960    1950    1940

United States         $602    $447    $243    $108     $71     $42     $27

Alabama               $447    $325    $188     $69     $45     $25     $12
Alaska                $720    $559    $368    $189    $126     NA      NA
Arizona               $619    $438    $264    $109     $69     $37     $18
Arkansas              $453    $328    $185     $71     $47     $28     $12
California            $747    $620    $283    $126     $79     $42     $27
Colorado              $671    $418    $252    $110     $72     $39     $22
Connecticut           $681    $598    $260    $127     $77     $45     $34
Delaware              $639    $495    $247    $111     $77     $46     $30
District of Colu      $618    $479    $224    $119     $81     $57     $45
Florida               $641    $481    $255    $112     $71     $39     $16
Georgia               $613    $433    $211     $86     $51     $27     $13
Hawaii                $779    $650    $311    $132     $72     NA      NA
Idaho                 $515    $330    $218     $92     $65     $44     $21
Illinois              $605    $445    $246    $124     $85     $47     $33
Indiana               $521    $374    $218    $105     $70     $42     $24
Iowa                  $470    $336    $226     $99     $68     $43     $23
Kansas                $498    $372    $218     $94     $66     $38     $19
Kentucky              $445    $319    $198     $83     $55     $31     $16
Louisiana             $466    $352    $214     $81     $53     $27     $15
Maine                 $497    $419    $216     $90     $64     $41     $25
Maryland              $689    $548    $266    $127     $78     $46     $27
Massachusetts         $684    $580    $255    $117     $75     $47     $34
Michigan              $546    $423    $250    $115     $77     $47     $33
Minnesota             $566    $422    $236    $117     $72     $43     $28
Mississippi           $439    $309    $180     $65     $43     $25     $11
Missouri              $484    $368    $211     $96     $65     $36     $22
Montana               $447    $311    $200     $89     $66     $41     $23
Nebraska              $491    $348    $213     $95     $67     $43     $22
Nevada                $699    $509    $310    $141     $91     $47     $26
New Hampshire         $646    $549    $251     $99     $65     $41     $26
New Jersey            $751    $592    $270    $126     $80     $49     $36
New Mexico            $503    $372    $215     $88     $71     $41     $17
New York              $672    $486    $249    $111     $74     $48     $39
North Carolina        $548    $382    $205     $86     $55     $30     $14
North Dakota          $412    $313    $206     $97     $71     $43     $21
Ohio                  $515    $379    $225    $105     $75     $42     $28
Oklahoma              $456    $340    $215     $82     $57     $34     $16
Oregon                $620    $408    $257    $107     $70     $44     $21
Pennsylvania          $531    $404    $224     $93     $64     $40     $27
Rhode Island          $553    $489    $222     $93     $62     $40     $28
South Carolina        $510    $376    $206     $77     $49     $26     $12
South Dakota          $426    $306    $188     $88     $67     $42     $21
Tennessee             $505    $357    $203     $82     $52     $31     $15
Texas                 $574    $395    $246     $95     $60     $37     $17
Utah                  $597    $369    $235     $97     $66     $40     $23
Vermont               $553    $446    $224     $98     $62     $41     $24
Virginia              $650    $495    $259    $115     $71     $39     $19
Washington            $663    $445    $254    $113     $71     $43     $22
West Virginia         $401    $303    $195     $72     $53     $28     $17
Wisconsin             $540    $399    $234    $113     $79     $49     $31
Wyoming               $437    $333    $252     $87     $67     $41     $22

Source: Us Census Bureau https://www2.census.gov/programs-surveys/decennial/tables/time-series/coh-grossrents/grossrents-unadj.txt