Decatur, IL Cap Rate 7.68%
Decatur is one of the most affordable markets in the country in the Midwest with a small but investable metro of 50,000. At a 7.68% estimated cap rate, this is a high-yield market where rents at $1,120/mo track reasonably with home values. With a median home price of $120,000 and population is roughly stable, Decatur stands out as a market worth serious analysis for rental investors.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Decatur
At a 0.9% rent-to-price ratio, Decatur falls just below the 1% rule threshold. A median-priced property at $120,000 with $1,120/mo rent yields approximately $768/mo in NOI — workable with favorable financing but not a slam-dunk cash flow market.
On a conventional loan with 20% down ($24K) at 7%, estimated monthly cash flow is $130 — a thin 6.5% cash-on-cash return. Investors should negotiate below asking price or target properties with above-median rents to build a meaningful cash flow buffer.
Property taxes consume 18% of gross rent here — one of the highest ratios in our dataset. This significantly compresses margins and makes Decatur a market where tax-conscious underwriting is essential. Every deal should be stress-tested with potential assessment increases.
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 2.06% effective rate on the $120,000 median price, the annual tax bill is $2,472 — that's very high (top 15% of US markets) (+94% 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 2.1%/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 | $120K | $1,120 | 7.7% |
| Year 1 | $123K | $1,154 | 7.7% |
| Year 2 | $125K | $1,188 | 7.8% |
| Year 3 | $128K | $1,224 | 7.9% |
| Year 4 | $130K | $1,261 | 8.0% |
| Year 5 | $133K | $1,298 | 8.0% |
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 | $120K | $768 | $9,215 | 7.7% |
| 20% down conventional @ 7% | $28K | $130 | $1,554 | 5.6% |
| 25% down DSCR @ 8.5% | $35K | $76 | $910 | 2.6% |
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) | $90K | $952 | $6,708 | 7.5% | $559 |
| At median | $120K | $1,120 | $7,545 | 6.3% | $629 |
| Above median (~125% price) | $150K | $1,288 | $8,381 | 5.6% | $698 |
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 2.1%:
On a $24K down payment, that's a 117.1% 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, IL has a population of 50,000 and has been growing at 0.2% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $120,000 paired with median rents of $1,120/mo produces an estimated cap rate of 7.68%.
Property taxes at 2.06% 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 5.9% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 1.9x, homes cost about 1.9 times the local median income of $62,333. This relatively affordable ratio suggests a deep pool of renters who find buying out of reach, supporting rental demand. Home values have appreciated at roughly 2.1% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Decatur offers attractive fundamentals for rental investors. and cap rates above 6% put it in the upper tier of investable markets.