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Cap Rate Analysis: Ann Arbor, MI

Investment metrics, interactive calculators, and data-driven analysis for Ann Arbor rental properties.

Challenging for pure cash flow
Based on $395,000 median price and $1,680/mo median rent
Est. Cap Rate
2.61%
1% Rule
0.43%
Fails
GRM
19.6x
Price / Income
5.8x

Market Data

Median Home Price$395,000
Median Monthly Rent$1,680
Property Tax Rate1.48%
Population125,710
Population Growth0.8% / yr
Median Household Income$68,200
Vacancy Rate4.2%
Annual Appreciation3%

Cap Rate Calculator — Ann Arbor

Pre-filled with Ann Arbor medians. Adjust to match a specific property.

Property Details
$
$
3–8% typical
%
Monthly Expenses
1.48% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
2.09%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$8,261
net operating income
Gross Rent Multiplier
19.6x
High (>15)
1% Rule
0.43%
✗ Fails
Monthly Cash Flow
$688
before debt service
Annual Breakdown
Gross Rental Income$20,160
Less Vacancy−$847
Effective Income$19,313
Less Operating Expenses−$11,052
Net Operating Income$8,261

Cash-on-Cash Return — Ann Arbor

Factor in financing to see your actual return on invested capital in Ann Arbor.

$
$98,750
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-10.39%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$110,600
$98,750 down + $11,850 closing
Monthly Mortgage
$1,931
on $296K loan
Monthly Cash Flow
$-957
after all expenses
Annual Cash Flow
$-11,488
before taxes
Cash Flow Breakdown
Monthly Rent$1,680
Less Expenses−$706
Less Mortgage−$1,931
Monthly Cash Flow$-957

Is Ann Arbor a Good Place to Invest in Rental Property?

Ann Arbor, MI has a population of 125,710 and has been growing at 0.8% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $395,000 paired with median rents of $1,680/mo produces an estimated cap rate of 2.61%.

Property taxes at 1.48% fall within the national average range and shouldn't present unusual challenges. The vacancy rate of 4.2% is impressively low, indicating tight rental supply and strong tenant demand — favorable for landlords.

At a price-to-income ratio of 5.8x, homes cost about 5.8 times the local median income of $68,200. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 3% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.

Bottom line: At current median prices, Ann Arbor is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.

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