Hot Springs, AR Cap Rate 4.51%
Hot Springs is a budget-friendly market in the South with a small but investable metro of 50,000. At a 4.51% estimated cap rate, this is a moderate market where rents of $1,260/mo lag behind home prices. With a median home price of $240,000 and steady population growth supports long-term rental demand, Hot Springs 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: Hot Springs
Hot Springs's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $240,000, the $1,260/mo rent produces only $902/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 ($48K at 7%) would result in approximately $-375/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 15.9x gross rent multiplier and 6% vacancy rate position Hot Springs as a balanced market. With annual appreciation at 2.5%, total returns (cash flow + equity growth) run approximately 7.0% before financing leverage.
Deal Modeling & Scenarios for Hot Springs
All figures below are computed from Hot Springs's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.61% effective rate on the $240,000 median price, the annual tax bill is $1,464 — that's below national average (-42% 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 Hot Springs continues appreciating at 2.5%/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 | $240K | $1,260 | 4.5% |
| Year 1 | $246K | $1,298 | 4.5% |
| Year 2 | $252K | $1,337 | 4.6% |
| Year 3 | $258K | $1,377 | 4.6% |
| Year 4 | $265K | $1,418 | 4.6% |
| Year 5 | $272K | $1,461 | 4.6% |
Three Financing Scenarios
Same median-priced Hot Springs 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 | $240K | $902 | $10,829 | 4.5% |
| 20% down conventional @ 7% | $55K | $-374 | $-4,493 | -8.1% |
| 25% down DSCR @ 8.5% | $70K | $-482 | $-5,782 | -8.3% |
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) | $180K | $1,071 | $8,207 | 4.6% | $684 |
| At median | $240K | $1,260 | $9,370 | 3.9% | $781 |
| Above median (~125% price) | $300K | $1,449 | $10,533 | 3.5% | $878 |
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 Hot Springs's historical appreciation rate of 2.5%:
On a $48K down payment, that's a 48.9% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Hot Springs
Automated checks against the underlying data — surface only the risks that actually apply to Hot Springs, not generic boilerplate:
Cap Rate Calculator — Hot Springs
Pre-filled with Hot Springs medians. Adjust to match a specific property.
Cash-on-Cash Return — Hot Springs
Factor in financing to see your actual return on invested capital in Hot Springs.
Is Hot Springs a Good Place to Invest in Rental Property?
Hot Springs, AR has a population of 50,000 and has been growing at 0.9% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $240,000 paired with median rents of $1,260/mo produces an estimated cap rate of 4.51%.
Property taxes at 0.61% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 6% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.2x, homes cost about 5.2 times the local median income of $46,400. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.5% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Hot Springs presents moderate opportunities. Cap rates near 4.51% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.