Indianapolis, IN Cap Rate: 4.24% — Rental Property Analysis
Indianapolis is a mid-range market in the Midwest with a major metro of 882,039 residents. At a 4.24% estimated cap rate, this is a moderate market where rents of $1,490/mo lag behind home prices. With a median home price of $285,000 and steady population growth supports long-term rental demand, Indianapolis 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
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Moderate — source deals carefully
Based on $285,000 median price and $1,490/mo median rent
Est. Cap Rate
4.24%
1% Rule
0.52%
Fails
GRM
15.9x
Price / Income
5.4x
Market Data
Median Home Price$285,000
Median Monthly Rent$1,490
Property Tax Rate0.84%
Population882,039
Population Growth0.9% / yr
Median Household Income$52,900
Vacancy Rate6.2%
Annual Appreciation2.8%
2026 Market Update: Indianapolis
Indianapolis's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $285,000, the $1,490/mo rent produces only $1,008/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 ($57K at 7%) would result in approximately $-508/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 6.2% vacancy rate position Indianapolis as a balanced market. With annual appreciation at 2.8%, total returns (cash flow + equity growth) run approximately 7.0% before financing leverage.
Cap Rate Calculator — Indianapolis
Pre-filled with Indianapolis medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.84% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
3.51%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$10,015
net operating income
Gross Rent Multiplier
15.9x
High (>15)
1% Rule
0.52%
✗ Fails
Monthly Cash Flow
$835
before debt service
Annual Breakdown
Gross Rental Income$17,880
Less Vacancy−$1,109
Effective Income$16,771
Less Operating Expenses−$6,756
Net Operating Income$10,015
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Factor in financing to see your actual return on invested capital in Indianapolis.
$
$71,250
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-7.96%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$79,800
$71,250 down + $8,550 closing
Monthly Mortgage
$1,393
on $214K loan
Monthly Cash Flow
$-529
after all expenses
Annual Cash Flow
$-6,354
before taxes
Cash Flow Breakdown
Monthly Rent$1,490
Less Expenses−$626
Less Mortgage−$1,393
Monthly Cash Flow$-529
Is Indianapolis a Good Place to Invest in Rental Property?
Indianapolis, IN has a population of 882,039 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 $285,000 paired with median rents of $1,490/mo produces an estimated cap rate of 4.24%.
Property taxes at 0.84% fall within the national average range and shouldn't present unusual challenges. The vacancy rate of 6.2% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.4x, homes cost about 5.4 times the local median income of $52,900. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.8% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Indianapolis presents moderate opportunities. Cap rates near 4.24% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.
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