Baton Rouge, LA Cap Rate 4.95%
Baton Rouge is the capital of Louisiana and the second-largest metro in the state — uniquely anchored by Louisiana state government, LSU, the major ExxonMobil refinery, and the broader Mississippi River petrochemical corridor. The 4.95% cap rate at a $240,000 median price keeps the 0.56% rent-to-price ratio close to functional. Population growth at 0.5%/yr is essentially flat — Louisiana's broader demographic trajectory has been mixed.
Employment is anchored by Louisiana State University (LSU — the state flagship with ~37K students plus the broader research and athletic enterprise; LSU is a major SEC university with extraordinary game-day demand), Louisiana state government (Baton Rouge is the state capital — federal, state, and East Baton Rouge Parish government collectively a major employment cluster), the ExxonMobil Baton Rouge Refinery (one of the larger US refineries — 502,500 barrels-per-day capacity; the broader Mississippi River industrial corridor between Baton Rouge and New Orleans is one of the largest US petrochemical clusters), Our Lady of the Lake Regional Medical Center and Baton Rouge General, Southern University (HBCU), the broader East Baton Rouge Parish government, and a meaningful logistics base tied to the Port of Greater Baton Rouge on the Mississippi River. Submarkets stratify cleanly: the historic Garden District and Bocage areas are walkable urban-historic with strong appreciation; the broader Central and Zachary areas draw professional family rentals; the LSU-adjacent zones are student-heavy with operational complexity tied to August-to-July leasing; the broader Baton Rouge extends with deeper-value workforce inventory.
Louisiana property tax at 0.56% looks moderate but the homestead exemption distortion means non-owner-occupant investors pay materially more than the headline rate suggests. LA state income tax is graduated with a top rate near 4.25%. Insurance is the dominant operational variable — Louisiana's insurance crisis (driven by 2020-2021 hurricane seasons) has continued to be challenging even for inland metros like Baton Rouge; Hurricane Ida in 2021 caused damage in the broader metro. Get a binder quote per address. The structural advantages: LSU + state government + ExxonMobil + LSU Health is a genuinely diversified employer mix; SEC football game-day STR upside is meaningful (LSU hosts 7 home games annually); LA tax structure isn't as favorable as TX but the broader cost-of-living-to-employment ratio is favorable. The structural risks: insurance trajectory remains the central operational variable; LA demographic trajectory has been weak; per-block variance in some Baton Rouge neighborhoods. For investors who want SEC college-town + state-capital + petrochemical-anchor exposure at a low cost basis, Baton Rouge is the most defensible Louisiana option outside New Orleans.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Baton Rouge
Baton Rouge's 0.6% rent-to-price ratio is well below the 1% rule. At median prices of $240,000, the $1,350/mo rent produces only $990/mo in NOI. Investors here need to target below-median properties or pursue value-add strategies to make the numbers work.
At current rates, a 20% down conventional loan ($48K at 7%) would result in approximately $-287/mo cash flow — negative at median prices. Larger down payments, seller financing, or buying 15–25% below median are strategies to turn the numbers positive.
The 14.8x gross rent multiplier and 6.5% vacancy rate position Baton Rouge as a balanced market. With annual appreciation at 2.3%, total returns (cash flow + equity growth) run approximately 7.3% before financing leverage.
Deal Modeling & Scenarios for Baton Rouge
All figures below are computed from Baton Rouge's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.56% effective rate on the $240,000 median price, the annual tax bill is $1,344 — that's very low (bottom 15% of US markets) (-47% vs the national average of ~1.06%). Verify the actual assessed value before purchase; sale-triggered reassessments can push the bill higher than the seller's current statement.
5-Year Cap Rate Trajectory
If Baton Rouge continues appreciating at 2.3%/yr while rents grow at a conservative 3%/yr, cap rate holds roughly steady as price growth outpaces rent. Year-by-year projection at the median:
| Year | Est. Price | Est. Rent/Mo | Cap Rate |
|---|---|---|---|
| Today | $240K | $1,350 | 5.0% |
| Year 1 | $246K | $1,391 | 5.0% |
| Year 2 | $251K | $1,432 | 5.0% |
| Year 3 | $257K | $1,475 | 5.1% |
| Year 4 | $263K | $1,519 | 5.1% |
| Year 5 | $269K | $1,565 | 5.1% |
Three Financing Scenarios
Same median-priced Baton Rouge property — different capital structures. All-cash maximizes cap rate. Leverage trades cash flow for higher cash-on-cash return when the spread between cap rate and borrowing cost is positive.
| Scenario | Cash Invested | Monthly Cash Flow | Annual CF | Cash-on-Cash |
|---|---|---|---|---|
| All cash | $240K | $990 | $11,883 | 5.0% |
| 20% down conventional @ 7% | $55K | $-287 | $-3,439 | -6.2% |
| 25% down DSCR @ 8.5% | $70K | $-394 | $-4,727 | -6.8% |
Three Price Tiers: Below, At, and Above the Median
Properties don't always trade at the median. Lower-priced units typically offer higher cap rates but harder operations; higher-priced properties tend to compress cap rates while attracting better tenants. All-cash assumptions below:
| Tier | Price | Rent/Mo | NOI/Yr | Cap Rate | Monthly CF |
|---|---|---|---|---|---|
| Below median (~75% price) | $180K | $1,148 | $8,948 | 5.0% | $746 |
| At median | $240K | $1,350 | $10,251 | 4.3% | $854 |
| Above median (~125% price) | $300K | $1,552 | $11,554 | 3.9% | $963 |
Total Return Over a 5-Year Hold
Cap rate is just one piece. Real estate returns come from four sources: cash flow, appreciation, principal paydown, and tax benefits. Assuming 20% down conventional financing at 7% and a 5-year hold at Baton Rouge's historical appreciation rate of 2.3%:
On a $48K down payment, that's a 54.4% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Baton Rouge
Automated checks against the underlying data — surface only the risks that actually apply to Baton Rouge, not generic boilerplate:
Cap Rate Calculator — Baton Rouge
Pre-filled with Baton Rouge medians. Adjust to match a specific property.
Cash-on-Cash Return — Baton Rouge
Factor in financing to see your actual return on invested capital in Baton Rouge.
Is Baton Rouge a Good Place to Invest in Rental Property?
Baton Rouge, LA has a population of 224,149 and has been growing at 0.5% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $240,000 paired with median rents of $1,350/mo produces an estimated cap rate of 4.95%.
Property taxes at 0.56% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 6.5% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.0x, homes cost about 5.0 times the local median income of $48,200. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.3% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Baton Rouge presents moderate opportunities. Cap rates near 4.95% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.