Duluth is a mid-range market in the Midwest with a smaller market with 92,000 residents. At a 5.78% estimated cap rate, this is a solid market where rents of $1,680/mo lag behind home prices. With a median home price of $250,000 and population is roughly stable, Duluth 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
Duluth's 0.7% rent-to-price ratio is well below the 1% rule. At median prices of $250,000, the $1,680/mo rent produces only $1,204/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 ($50K at 7%) would result in approximately $-126/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 12.4x gross rent multiplier and 5% vacancy rate position Duluth as a value-oriented market. With annual appreciation at 2.3%, total returns (cash flow + equity growth) run approximately 8.1% before financing leverage.
All figures below are computed from Duluth's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
At 1.08% effective rate on the $250,000 median price, the annual tax bill is $2,700 — that's near national average (+2% 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.
If Duluth 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 | $250K | $1,680 | 5.8% |
| Year 1 | $256K | $1,730 | 5.8% |
| Year 2 | $262K | $1,782 | 5.9% |
| Year 3 | $268K | $1,836 | 5.9% |
| Year 4 | $274K | $1,891 | 5.9% |
| Year 5 | $280K | $1,948 | 6.0% |
Same median-priced Duluth 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 | $250K | $1,204 | $14,452 | 5.8% |
| 20% down conventional @ 7% | $58K | $-126 | $-1,508 | -2.6% |
| 25% down DSCR @ 8.5% | $73K | $-238 | $-2,851 | -3.9% |
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) | $188K | $1,428 | $10,762 | 5.7% | $897 |
| At median | $250K | $1,680 | $12,226 | 4.9% | $1,019 |
| Above median (~125% price) | $313K | $1,932 | $13,690 | 4.4% | $1,141 |
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 Duluth's historical appreciation rate of 2.3%:
On a $50K down payment, that's a 75.1% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Automated checks against the underlying data — surface only the risks that actually apply to Duluth, not generic boilerplate:
Pre-filled with Duluth medians. Adjust to match a specific property.
Factor in financing to see your actual return on invested capital in Duluth.
Duluth, MN has a population of 92,000 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 $250,000 paired with median rents of $1,680/mo produces an estimated cap rate of 5.78%.
Property taxes at 1.08% fall within the national average range and shouldn't present unusual challenges. The vacancy rate of 5% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.1x, homes cost about 5.1 times the local median income of $48,600. 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: Duluth presents moderate opportunities. Cap rates near 5.78% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.