1st Advantage MortgageMadison requires three separate approvals before a short-term rental can advertise: zoning, a public health license and a transient room tax permit.
Population: 285,300 (U.S. Census Bureau city and town estimate, July 1, 2024).
The Madison rental picture
Madison renters work in state government, the University of Wisconsin, UW Health, Epic Systems and the tech sector, and the student calendar drives a lot of turnover. Prices are high for the Midwest, so cash flow is tighter than in Milwaukee.
Pockets of Madison worth a closer look
- Willy Street and Marquette. walkable east side neighborhoods near the isthmus
- Vilas and Monroe Street. older homes near Lake Wingra
- Downtown and Campus. student apartment demand
- Middleton and Sun Prairie edge. suburban neighbors
- Allied Drive and southwest side. workforce rentals
What Madison requires of rental owners
Madison's short-term rental ordinance (Madison General Ordinance 9.29) requires a Zoning Tourist Rooming House Permit, a Public Health Madison and Dane County tourist rooming house license and a Transient Room Tax permit before advertising or renting, and renewals are due each June 30.
Local rules checked October 2026 against: Madison short-term rental regulations. Rules change, so confirm with the city before you rely on them.
What to price into the payment
Wisconsin property taxes are comparatively high against rent, and Dane County assessments should be checked for the address. Isthmus flooding along the lakes affects some low properties.
Market snapshot for Madison
A DSCR lender in Madison is comparing a rent against a payment, and the citywide benchmarks are a median gross rent of $1,413 and a median home value of $372,900. The rent figure is well above the Wisconsin median of $1,087. The gross rent-to-value ratio for Madison works out to 4.5% (twelve months of median rent divided by median value), a thin gross ratio, which tells you purchase prices are high relative to rent. The figure combines all rental types with all owner-occupied homes, so it is a screening number and not an appraisal.
| Indicator | Wisconsin | Madison | Difference |
|---|---|---|---|
| Annual property tax bill, median | $3,792 | $6,541 | +72% |
| Household income, median | $77,485 | $78,050 | +1% |
| Typical owner-occupied value | $266,500 | $372,900 | +40% |
| Typical monthly rent | $1,087 | $1,413 | +30% |
| Persons per household | 2.33 | 2.06 | |
| Share in 2-4 unit buildings | 9.4% | 10.7% | +14% |
| Long commuters, 45 min plus | 10.2% | 5.1% | -49% |
| Degree holders, age 25+ | 33.4% | 59.9% | +79% |
| Renters paying 30%+ of income | 43.7% | 50.2% | +15% |
| Units sitting vacant | 10.8% | 3.9% | -63% |
| Typical construction year | 1975 | 1980 | |
| Annual rent divided by value | 4.9% | 4.5% | -7% |
| Households that rent | 32.2% | 54.0% | +68% |
| Tax as a share of home value | 1.42% | 1.75% | +23% |
| Residents (Census estimate) | 5,914,872 | 278,001 |
The renter share in Madison is 54.0%, well above the Wisconsin median of 32%, so the rental market is large and competitive. Household income runs a median $78,050 (close to the Wisconsin median of $77,485), while 50% of renters spend 30 percent or more of income on housing.
Property types and condition in Madison
Apartments and small buildings carry real weight in Madison, about 54% of units, with duplexes through fourplexes at 11%. Median year built is 1980, so many homes are reaching the age when major systems need replacing.
The Census counts 4% of Madison housing units as vacant, with a rental vacancy figure of 3.3%.
Investor takeaways for Madison
Madison's 4.5% rent-to-value ratio is on the lean side, so expect lenders to ask for more cash down on a typical single-family purchase and to scrutinize insurance and tax estimates closely. Mid-aged stock (median built 1980) means many roofs and HVAC units are near the end of their lives, so ask for installation dates. Renter-heavy markets like Madison favor investors with a clear tenant profile, whether workers, students or families.
Insurance, tax and flood context for Madison
In Madison the median tax bill for an owner-occupied home is $6,541, or about 1.75% of value (Wisconsin overall: 1.42%). That bill is well above the Wisconsin median of $3,792. Compared with annual median rent, the tax line is about 39%.
Insurance follows risk. FEMA's National Risk Index lists Dane County as relatively moderate overall, with cold waves (very high), hail (relatively high) and tornadoes (relatively high) as the main drivers.
| Hazard in Dane County, FEMA index | Level |
|---|---|
| Riverine flooding exposure | Relatively High |
| Tornadoes exposure | Relatively High |
| Hail exposure | Relatively High |
| Cold waves exposure | Very High |
| Social vulnerability score | Very Low |
| Annualized loss estimate | Relatively Moderate |
| Composite risk | Relatively Moderate |
Price the insurance before you price the offer: a landlord quote for the Madison property, plus flood cover where the map requires it, goes into the payment your rent is divided against.
A worked DSCR test for Madison
Take the median rent ($1,413), subtract median taxes spread over twelve months ($545), and you have $868 of room at a 1.00 ratio. A lender asking for 1.25 cuts that to $585. Real quotes for the address decide the rest.
Registration, deposits and nightly stays in Madison
State tax treatment of short stays, as it applies to Madison. Wisconsin taxes short-term lodging of under a month, requires a marketplace that processes the guest's payment to collect state sales tax, and leaves municipal room taxes to be filed with each taxing municipality.
Deposits come due back within 21 days of the tenant leaving, and Madison owners should document condition at both ends of the lease.
Comparing Madison with surrounding markets
Prices in the comparison range from $207,100 in Wisconsin Dells to $223,400 in Janesville, with Madison at $372,900.
| Market | Renter share | Tax bill | Home value | Residents | Rent |
|---|---|---|---|---|---|
| Wisconsin Dells | 46% | $3,570 | $207,100 | 2,547 | |
| Janesville | 33% | $3,736 | $223,400 | 66,030 | $1,054 |
| Madison | 54% | $6,541 | $372,900 | 278,001 | $1,413 |
The renter base in Madison
The self-employed share of the workforce is 6.1%, and those owners tend to be exactly the buyers DSCR financing was built for. Around the edges, government workers are about 22% of employment, 60% of adults hold a bachelor's degree or higher and 5% of commuters travel 45 minutes or more.
Campuses such as University of Wisconsin-Madison, Edgewood University, University of Wisconsin System and Madison Area Technical College pull tenants into Madison, and landlords near them can plan around move-in seasons. Access runs through interstate access via I-39 and air service through Dane County Regional Airport and Middleton Municipal Airport, which shapes where commuters want to live and how long a showing takes.
Moving from numbers to a Madison loan
Run the Madison rent, tax and insurance figures through the DSCR calculator. When they clear the ratio, start an application or ask for a quote.
More Wisconsin markets
- All Wisconsin DSCR loans
- DSCR loans in Janesville, WI
- DSCR loans in Wisconsin Dells, WI
- Every market we cover
Source links
- 2020 to 2024 ACS data used for Madison
- FEMA county hazard table
- Wikipedia article, Madison, Wisconsin
- Madison landlords: see Wis. Stat. 704.28; Wis. Admin. Code ATCP 134.06
- Lodging tax reference: Wisconsin DOR Publication 219
Census figures are 2020 to 2024 ACS five-year estimates for Madison and carry margins of error. Landlord rules for Madison rest on Wisconsin statutes and the CC BY 4.0 RedFlagLease dataset. Reviewed in October 2026, with no promise that rules have stayed put.
DSCR loan availability varies by property and lender program and is not an offer to lend. See our disclosures.
Frequently asked questions
What does Madison require for a short-term rental?
A zoning tourist rooming house permit, a public health tourist rooming house license and a transient room tax permit before you advertise or rent. Renewals are due each June 30.
What rent number goes into a Madison, WI DSCR calculation?
A signed lease or the appraiser's rent schedule supplies the rent, depending on the program, and $1,413 is the Census median for Madison renters, only a benchmark.
Do taxes and insurance count in the Madison DSCR ratio?
They count in full. A 1.25 ratio on $1,413 of rent permits a payment near $1,130, and median Madison taxes take about $545 of it each month.
What do Madison owners pay in real estate taxes?
Madison owners report a median $6,541 in annual real estate taxes, an effective 1.75% (Wisconsin: 1.42%). Your own bill depends on the assessed value after purchase.
Can I use Airbnb income to qualify in Madison?
Depending on the lender, yes, if the property may legally be used that way and income is documented. Confirm the local permit, association rules and Wisconsin lodging taxes before you underwrite nightly income in Madison.
What are the security deposit rules for a Wisconsin landlord?
Return: 21 days. Statute: Wis. Stat. 704.28; Wis. Admin. Code ATCP 134.06. Confirm current text before you rely on it.
Should I worry about hazards at a Madison property?
At the county level FEMA calls overall risk relatively moderate. Insurance, not the index, shows up in the ratio, so price a policy for the Madison address.
How do LLC closings work for Madison rentals?
It is optional. Lenders will close in a properly formed LLC and generally want the members to guarantee. Ask your accountant how a WI entity would be taxed.