Dothan, AL Cap Rate: 5.80% — Rental Property Analysis
Dothan is a budget-friendly market in the South with a smaller market with 72,500 residents. At a 5.80% estimated cap rate, this is a solid market where rents of $1,190/mo lag behind home prices. With a median home price of $190,000 and population is roughly stable, Dothan 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
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Moderate — source deals carefully
Based on $190,000 median price and $1,190/mo median rent
Est. Cap Rate
5.80%
1% Rule
0.63%
Fails
GRM
13.3x
Price / Income
4.3x
Market Data
Median Home Price$190,000
Median Monthly Rent$1,190
Property Tax Rate0.4%
Population72,500
Population Growth0.3% / yr
Median Household Income$44,200
Vacancy Rate6.8%
Annual Appreciation2%
2026 Market Update: Dothan
Dothan's 0.6% rent-to-price ratio is well below the 1% rule. At median prices of $190,000, the $1,190/mo rent produces only $919/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 ($38K at 7%) would result in approximately $-92/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 13.3x gross rent multiplier and 6.8% vacancy rate position Dothan as a value-oriented market. With annual appreciation at 2%, total returns (cash flow + equity growth) run approximately 7.8% before financing leverage.
Cap Rate Calculator — Dothan
Pre-filled with Dothan medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.4% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
4.86%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$9,229
net operating income
Gross Rent Multiplier
13.3x
Good (<15)
1% Rule
0.63%
✗ Fails
Monthly Cash Flow
$769
before debt service
Annual Breakdown
Gross Rental Income$14,280
Less Vacancy−$971
Effective Income$13,309
Less Operating Expenses−$4,080
Net Operating Income$9,229
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Factor in financing to see your actual return on invested capital in Dothan.
$
$47,500
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-5.39%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$53,200
$47,500 down + $5,700 closing
Monthly Mortgage
$929
on $143K loan
Monthly Cash Flow
$-239
after all expenses
Annual Cash Flow
$-2,868
before taxes
Cash Flow Breakdown
Monthly Rent$1,190
Less Expenses−$500
Less Mortgage−$929
Monthly Cash Flow$-239
Is Dothan a Good Place to Invest in Rental Property?
Dothan, AL has a population of 72,500 and has been growing at 0.3% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $190,000 paired with median rents of $1,190/mo produces an estimated cap rate of 5.80%.
Property taxes at 0.4% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 6.8% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 4.3x, homes cost about 4.3 times the local median income of $44,200. 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% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Dothan presents moderate opportunities. Cap rates near 5.80% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.
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