Hilo, HI Cap Rate 4.03%
Hilo is a premium-priced metro in the West with a small but investable metro of 50,000. At a 4.03% estimated cap rate, this is a moderate market where rents of $2,490/mo lag behind home prices. With a median home price of $560,000 and population is roughly stable, Hilo offers opportunities for investors who source deals carefully.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Hilo
Hilo's 0.4% rent-to-price ratio is well below the 1% rule. At median prices of $560,000, the $2,490/mo rent produces only $1,881/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 ($112K at 7%) would result in approximately $-1,098/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 18.7x gross rent multiplier and 4.2% vacancy rate position Hilo as a growth-dependent market. With annual appreciation at 2%, total returns (cash flow + equity growth) run approximately 6.0% before financing leverage.
Deal Modeling & Scenarios for Hilo
All figures below are computed from Hilo's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.28% effective rate on the $560,000 median price, the annual tax bill is $1,568 — that's very low (bottom 15% of US markets) (-74% 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 Hilo continues appreciating at 2%/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 | $560K | $2,490 | 4.0% |
| Year 1 | $571K | $2,565 | 4.1% |
| Year 2 | $583K | $2,642 | 4.1% |
| Year 3 | $594K | $2,721 | 4.2% |
| Year 4 | $606K | $2,803 | 4.2% |
| Year 5 | $618K | $2,887 | 4.2% |
Three Financing Scenarios
Same median-priced Hilo 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 | $560K | $1,881 | $22,577 | 4.0% |
| 20% down conventional @ 7% | $129K | $-1,098 | $-13,173 | -10.2% |
| 25% down DSCR @ 8.5% | $162K | $-1,348 | $-16,181 | -10.0% |
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) | $420K | $2,117 | $17,416 | 4.1% | $1,451 |
| At median | $560K | $2,490 | $20,036 | 3.6% | $1,670 |
| Above median (~125% price) | $700K | $2,864 | $22,666 | 3.2% | $1,889 |
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 Hilo's historical appreciation rate of 2%:
On a $112K down payment, that's a 23.2% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Hilo
Automated checks against the underlying data — surface only the risks that actually apply to Hilo, not generic boilerplate:
Cap Rate Calculator — Hilo
Pre-filled with Hilo medians. Adjust to match a specific property.
Cash-on-Cash Return — Hilo
Factor in financing to see your actual return on invested capital in Hilo.
Is Hilo a Good Place to Invest in Rental Property?
Hilo, HI 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 $560,000 paired with median rents of $2,490/mo produces an estimated cap rate of 4.03%.
Property taxes at 0.28% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 4.2% is impressively low, indicating tight rental supply and strong tenant demand — favorable for landlords.
At a price-to-income ratio of 6.7x, homes cost about 6.7 times the local median income of $84,200. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. 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: Hilo presents moderate opportunities. Cap rates near 4.03% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.