Knoxville, TN Cap Rate: 4.16% — Rental Property Analysis
Knoxville is a higher-priced market in the South with a mid-sized city of 192,648. At a 4.16% estimated cap rate, this is a moderate market where rents of $1,720/mo lag behind home prices. With a median home price of $355,000 and steady population growth supports long-term rental demand, Knoxville 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 $355,000 median price and $1,720/mo median rent
Est. Cap Rate
4.16%
1% Rule
0.48%
Fails
GRM
17.2x
Price / Income
7.6x
Market Data
Median Home Price$355,000
Median Monthly Rent$1,720
Property Tax Rate0.55%
Population192,648
Population Growth1.2% / yr
Median Household Income$46,800
Vacancy Rate5.2%
Annual Appreciation3.5%
2026 Market Update: Knoxville
Knoxville's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $355,000, the $1,720/mo rent produces only $1,231/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 ($71K at 7%) would result in approximately $-658/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 17.2x gross rent multiplier and 5.2% vacancy rate position Knoxville as a balanced market. With annual appreciation at 3.5%, total returns (cash flow + equity growth) run approximately 7.7% before financing leverage.
Cap Rate Calculator — Knoxville
Pre-filled with Knoxville medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.55% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
3.51%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$12,475
net operating income
Gross Rent Multiplier
17.2x
High (>15)
1% Rule
0.48%
✗ Fails
Monthly Cash Flow
$1,040
before debt service
Annual Breakdown
Gross Rental Income$20,640
Less Vacancy−$1,073
Effective Income$19,567
Less Operating Expenses−$7,092
Net Operating Income$12,475
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Factor in financing to see your actual return on invested capital in Knoxville.
$
$88,750
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-8.91%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$99,400
$88,750 down + $10,650 closing
Monthly Mortgage
$1,736
on $266K loan
Monthly Cash Flow
$-738
after all expenses
Annual Cash Flow
$-8,853
before taxes
Cash Flow Breakdown
Monthly Rent$1,720
Less Expenses−$722
Less Mortgage−$1,736
Monthly Cash Flow$-738
Is Knoxville a Good Place to Invest in Rental Property?
Knoxville, TN has a population of 192,648 and has been growing at 1.2% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $355,000 paired with median rents of $1,720/mo produces an estimated cap rate of 4.16%.
Property taxes at 0.55% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 5.2% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 7.6x, homes cost about 7.6 times the local median income of $46,800. This elevated ratio means homeownership is stretched, supporting rental demand but limiting buyer pools. Home values have appreciated at roughly 3.5% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Knoxville presents moderate opportunities. Cap rates near 4.16% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.
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