Decatur, AL Cap Rate 4.32%
Decatur is a Tennessee Valley industrial market in northern Alabama — uniquely anchored by 3M's major manufacturing facility, Toray Industries' carbon fiber production, and proximity to the TVA Browns Ferry Nuclear Plant. The 4.32% cap rate at a $225,000 median price keeps the 0.49% rent-to-price ratio close to functional. Population growth at 0.8%/yr is modest.
Employment is anchored by 3M Decatur (one of 3M's major US manufacturing complexes — a meaningful skilled-trades and engineering employer), Toray Industries (the Japanese carbon-fiber manufacturer operates one of the larger US carbon-fiber production facilities here — a meaningful aerospace-supplier employer), Daikin (the air-conditioning manufacturer with major Decatur operations), United Launch Alliance (legacy operations connected to the Marshall Space Flight Center / Huntsville aerospace corridor 25 miles east), the broader TVA Browns Ferry Nuclear Plant (the largest US nuclear plant by capacity, located in Athens just west — produces sustained engineering and skilled-trades tenant demand for Decatur), Decatur Morgan Hospital, the broader Morgan County government, and the broader Tennessee Valley logistics economy. Submarkets stratify cleanly: the historic Albany / Bank Street district is walkable urban-historic with strong appreciation; the broader Southwest Decatur and Priceville areas draw professional family rentals at premium pricing; the broader Morgan County extends with newer construction; the central and east Decatur zones offer deeper-value workforce inventory.
Alabama property tax at 0.42% is among the lowest in the country. AL state income tax is moderate. Insurance is reasonable but verify tornado / severe-weather deductible structure. The structural advantages: 3M + Toray + Daikin + TVA-adjacent employment provides a genuinely diversified industrial base; the broader Huntsville aerospace corridor (25 miles east) spills meaningful aerospace-supplier demand into Decatur; cost basis is materially below Huntsville; AL tax structure favors landlords. The structural risks: heavy industrial-employer concentration is sensitive to specific corporate decisions; the broader Tennessee Valley environmental and PFAS-related industrial-legacy concerns affect some submarkets near older industrial sites — verify with local environmental records. For investors who want north Alabama industrial-anchored exposure at a lower cost basis than Huntsville, Decatur is the most defensible Tennessee Valley alternative.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Decatur
Decatur's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $225,000, the $1,110/mo rent produces only $810/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 ($45K at 7%) would result in approximately $-387/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 16.9x gross rent multiplier and 6.4% vacancy rate position Decatur as a balanced market. With annual appreciation at 2.3%, total returns (cash flow + equity growth) run approximately 6.6% before financing leverage.
Deal Modeling & Scenarios for Decatur
All figures below are computed from Decatur's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.42% effective rate on the $225,000 median price, the annual tax bill is $945 — that's very low (bottom 15% of US markets) (-60% 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 Decatur 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 | $225K | $1,110 | 4.3% |
| Year 1 | $230K | $1,143 | 4.3% |
| Year 2 | $235K | $1,178 | 4.4% |
| Year 3 | $241K | $1,213 | 4.4% |
| Year 4 | $246K | $1,249 | 4.4% |
| Year 5 | $252K | $1,287 | 4.5% |
Three Financing Scenarios
Same median-priced Decatur 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 | $225K | $810 | $9,723 | 4.3% |
| 20% down conventional @ 7% | $52K | $-387 | $-4,641 | -9.0% |
| 25% down DSCR @ 8.5% | $65K | $-487 | $-5,850 | -9.0% |
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) | $169K | $944 | $7,407 | 4.4% | $617 |
| At median | $225K | $1,110 | $8,491 | 3.8% | $708 |
| Above median (~125% price) | $281K | $1,277 | $9,585 | 3.4% | $799 |
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 Decatur's historical appreciation rate of 2.3%:
On a $45K down payment, that's a 38.6% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Decatur
Automated checks against the underlying data — surface only the risks that actually apply to Decatur, not generic boilerplate:
Cap Rate Calculator — Decatur
Pre-filled with Decatur medians. Adjust to match a specific property.
Cash-on-Cash Return — Decatur
Factor in financing to see your actual return on invested capital in Decatur.
Is Decatur a Good Place to Invest in Rental Property?
Decatur, AL has a population of 50,000 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 $225,000 paired with median rents of $1,110/mo produces an estimated cap rate of 4.32%.
Property taxes at 0.42% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 6.4% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 4.5x, homes cost about 4.5 times the local median income of $49,614. 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: Decatur presents moderate opportunities. Cap rates near 4.32% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.