Louisville, KY Cap Rate: 3.96% — Rental Property Analysis
Louisville is a mid-range market in the South with a major metro of 633,045 residents. At a 3.96% estimated cap rate, this is a appreciation-focused market where rents of $1,360/mo lag behind home prices. With a median home price of $275,000 and steady population growth supports long-term rental demand, Louisville is primarily an appreciation play that requires creative strategies to generate positive cash flow.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
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Challenging for pure cash flow
Based on $275,000 median price and $1,360/mo median rent
Est. Cap Rate
3.96%
1% Rule
0.49%
Fails
GRM
16.9x
Price / Income
4.9x
Market Data
Median Home Price$275,000
Median Monthly Rent$1,360
Property Tax Rate0.83%
Population633,045
Population Growth0.6% / yr
Median Household Income$55,800
Vacancy Rate5.8%
Annual Appreciation2.9%
2026 Market Update: Louisville
Louisville's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $275,000, the $1,360/mo rent produces only $908/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 ($55K at 7%) would result in approximately $-555/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 16.9x gross rent multiplier and 5.8% vacancy rate position Louisville as a balanced market. With annual appreciation at 2.9%, total returns (cash flow + equity growth) run approximately 6.9% before financing leverage.
Cap Rate Calculator — Louisville
Pre-filled with Louisville medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.83% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
3.29%Low
Net Operating Income ÷ Purchase Price
NOI / Year
$9,049
net operating income
Gross Rent Multiplier
16.9x
High (>15)
1% Rule
0.49%
✗ Fails
Monthly Cash Flow
$754
before debt service
Annual Breakdown
Gross Rental Income$16,320
Less Vacancy−$947
Effective Income$15,373
Less Operating Expenses−$6,324
Net Operating Income$9,049
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Factor in financing to see your actual return on invested capital in Louisville.
$
$68,750
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-8.66%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$77,000
$68,750 down + $8,250 closing
Monthly Mortgage
$1,345
on $206K loan
Monthly Cash Flow
$-556
after all expenses
Annual Cash Flow
$-6,667
before taxes
Cash Flow Breakdown
Monthly Rent$1,360
Less Expenses−$571
Less Mortgage−$1,345
Monthly Cash Flow$-556
Is Louisville a Good Place to Invest in Rental Property?
Louisville, KY has a population of 633,045 and has been growing at 0.6% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $275,000 paired with median rents of $1,360/mo produces an estimated cap rate of 3.96%.
Property taxes at 0.83% fall within the national average range and shouldn't present unusual challenges. The vacancy rate of 5.8% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 4.9x, homes cost about 4.9 times the local median income of $55,800. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.9% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: At current median prices, Louisville is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.
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