McKinney, TX Cap Rate 2.59%
McKinney is the Collin County seat and one of the fastest-growing US cities for the past decade — anchored by the broader DFW corporate-relocation wave that's reshaped North Texas, premier school districts, and a meticulously-preserved historic downtown. The 2.59% cap rate at a $360,000 median price reflects sustained premium positioning. The 0.45% rent-to-price ratio sits below the 1% rule. Population growth at 3.5%/yr is among the strongest in the country.
Employment is anchored by the broader DFW corporate corridor (most working McKinney residents commute to the broader Plano/Frisco/Legacy West employment centers — Toyota NA, Liberty Mutual, JPMorgan Chase, FedEx, the broader corporate-HQ relocation wave that's heavily concentrated in Collin County), Raytheon Technologies (the major McKinney engineering and manufacturing operations), Medical City McKinney and Baylor Scott & White Medical Center McKinney, Encore Wire (electrical-wire manufacturer headquartered here), the broader McKinney Independent School District (consistently among the highest-ranked US public school districts — a primary structural draw for relocating families), the broader Collin County government, and the broader historic downtown McKinney retail-and-restaurant district. Submarkets stratify cleanly: the historic downtown McKinney and surrounding 1880s-era zones are walkable urban-historic with strong appreciation; the broader Stonebridge Ranch master-planned community is premium suburban-school; the broader Eldorado and Adriatica areas draw professional family rentals; the broader McKinney extends with continuing new construction.
Texas has no state income tax (a structural cash-flow advantage). Property tax at 1.78% is on the higher end nationally (Texas property tax compensates for no state income tax — and Collin County / McKinney has among the higher effective rates in DFW). Collin County's appraisal cycle is annual; new buyers don't inherit seller's lower assessment. Insurance is reasonable but verify hail / tornado deductible structure. The structural advantages: the broader Collin County corporate-relocation wave has been continuous for 15+ years; McKinney ISD is genuinely one of the most-recognized US public school districts; the historic downtown McKinney has been continuously gentrifying with strong appreciation; TX tax structure favors landlords. The structural risks: pricing has compressed cap rates well below national averages; high effective property tax structure is a real drag on cash flow; the entire premium-pricing thesis depends on continued DFW corporate-employer health. For investors who want premium North DFW exposure with historic-downtown character and school-district stability, McKinney is the most distinctive Collin County option.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: McKinney
McKinney's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $360,000, the $1,630/mo rent produces only $778/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 ($72K at 7%) would result in approximately $-1,137/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.
Property taxes consume 33% of gross rent here — one of the highest ratios in our dataset. This significantly compresses margins and makes McKinney a market where tax-conscious underwriting is essential. Every deal should be stress-tested with potential assessment increases.
Deal Modeling & Scenarios for McKinney
All figures below are computed from McKinney's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 1.78% effective rate on the $360,000 median price, the annual tax bill is $6,408 — that's very high (top 15% of US markets) (+68% 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 McKinney continues appreciating at 3.2%/yr while rents grow at a conservative 3%/yr, cap rate compresses as price growth outpaces rent. Year-by-year projection at the median:
| Year | Est. Price | Est. Rent/Mo | Cap Rate |
|---|---|---|---|
| Today | $360K | $1,630 | 2.6% |
| Year 1 | $372K | $1,679 | 2.6% |
| Year 2 | $383K | $1,729 | 2.6% |
| Year 3 | $396K | $1,781 | 2.6% |
| Year 4 | $408K | $1,835 | 2.6% |
| Year 5 | $421K | $1,890 | 2.6% |
Three Financing Scenarios
Same median-priced McKinney 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 | $360K | $778 | $9,333 | 2.6% |
| 20% down conventional @ 7% | $83K | $-1,137 | $-13,649 | -16.5% |
| 25% down DSCR @ 8.5% | $104K | $-1,299 | $-15,582 | -14.9% |
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) | $270K | $1,386 | $7,287 | 2.7% | $607 |
| At median | $360K | $1,630 | $7,644 | 2.1% | $637 |
| Above median (~125% price) | $450K | $1,874 | $8,000 | 1.8% | $667 |
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 McKinney's historical appreciation rate of 3.2%:
On a $72K down payment, that's a 20.5% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to McKinney
Automated checks against the underlying data — surface only the risks that actually apply to McKinney, not generic boilerplate:
Cap Rate Calculator — McKinney
Pre-filled with McKinney medians. Adjust to match a specific property.
Cash-on-Cash Return — McKinney
Factor in financing to see your actual return on invested capital in McKinney.
Is McKinney a Good Place to Invest in Rental Property?
McKinney, TX has a population of 210,000 and has been growing at 3.5% annually — well above the national average, signaling strong housing demand from population inflows. The median home price of $360,000 paired with median rents of $1,630/mo produces an estimated cap rate of 2.59%.
Property taxes at 1.78% are notably high and represent a significant drag on cash flow — model this expense carefully, as it can make or break a deal. The vacancy rate of 4.8% is impressively low, indicating tight rental supply and strong tenant demand — favorable for landlords.
At a price-to-income ratio of 3.9x, homes cost about 3.9 times the local median income of $92,400. This relatively affordable ratio suggests a deep pool of renters who find buying out of reach, supporting rental demand. Home values have appreciated at roughly 3.2% 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, McKinney 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.