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Cap Rate Analysis: Houston, TX

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

Challenging for pure cash flow
Based on $310,000 median price and $1,520/mo median rent
Est. Cap Rate
2.90%
1% Rule
0.49%
Fails
GRM
17.0x
Price / Income
5.3x

Market Data

Median Home Price$310,000
Median Monthly Rent$1,520
Property Tax Rate1.81%
Population2,304,580
Population Growth1.5% / yr
Median Household Income$58,200
Vacancy Rate6.4%
Annual Appreciation2.8%

Cap Rate Calculator — Houston

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

Property Details
$
$
3–8% typical
%
Monthly Expenses
1.81% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
2.24%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$6,933
net operating income
Gross Rent Multiplier
17.0x
High (>15)
1% Rule
0.49%
✗ Fails
Monthly Cash Flow
$578
before debt service
Annual Breakdown
Gross Rental Income$18,240
Less Vacancy−$1,167
Effective Income$17,073
Less Operating Expenses−$10,140
Net Operating Income$6,933

Cash-on-Cash Return — Houston

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

$
$77,500
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-8.76%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$86,800
$77,500 down + $9,300 closing
Monthly Mortgage
$1,516
on $233K loan
Monthly Cash Flow
$-634
after all expenses
Annual Cash Flow
$-7,605
before taxes
Cash Flow Breakdown
Monthly Rent$1,520
Less Expenses−$638
Less Mortgage−$1,516
Monthly Cash Flow$-634

Is Houston a Good Place to Invest in Rental Property?

Houston, TX has a population of 2,304,580 and has been growing at 1.5% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $310,000 paired with median rents of $1,520/mo produces an estimated cap rate of 2.90%.

Property taxes at 1.81% are notably high and represent a significant drag on cash flow — model this expense carefully, as it can make or break a deal. The vacancy rate of 6.4% is moderate and within normal parameters for a healthy rental market.

At a price-to-income ratio of 5.3x, homes cost about 5.3 times the local median income of $58,200. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.8% 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, Houston 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.

Run a BRRRR analysis for Houston
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