Montgomery, AL Cap Rate: 6.29% — Rental Property Analysis
Montgomery is a budget-friendly market in the South with a mid-sized city of 200,603. At a 6.29% estimated cap rate, this is a solid market where rents of $1,380/mo lag behind home prices. With a median home price of $205,000 and population is roughly stable, Montgomery stands out as a market worth serious analysis for rental investors.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
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Strong investment fundamentals
Based on $205,000 median price and $1,380/mo median rent
Est. Cap Rate
6.29%
1% Rule
0.67%
Fails
GRM
12.4x
Price / Income
4.6x
Market Data
Median Home Price$205,000
Median Monthly Rent$1,380
Property Tax Rate0.41%
Population200,603
Population Growth0.2% / yr
Median Household Income$44,600
Vacancy Rate7.2%
Annual Appreciation1.9%
2026 Market Update: Montgomery
Montgomery's 0.7% rent-to-price ratio is well below the 1% rule. At median prices of $205,000, the $1,380/mo rent produces only $1,074/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 ($41K at 7%) would result in approximately $-17/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 12.4x gross rent multiplier and 7.2% vacancy rate position Montgomery as a value-oriented market. With annual appreciation at 1.9%, total returns (cash flow + equity growth) run approximately 8.2% before financing leverage.
Cap Rate Calculator — Montgomery
Pre-filled with Montgomery medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.41% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
5.24%Moderate
Net Operating Income ÷ Purchase Price
NOI / Year
$10,736
net operating income
Gross Rent Multiplier
12.4x
Good (<15)
1% Rule
0.67%
✗ Fails
Monthly Cash Flow
$895
before debt service
Annual Breakdown
Gross Rental Income$16,560
Less Vacancy−$1,192
Effective Income$15,368
Less Operating Expenses−$4,632
Net Operating Income$10,736
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Factor in financing to see your actual return on invested capital in Montgomery.
$
$51,250
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-4.23%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$57,400
$51,250 down + $6,150 closing
Monthly Mortgage
$1,002
on $154K loan
Monthly Cash Flow
$-202
after all expenses
Annual Cash Flow
$-2,428
before taxes
Cash Flow Breakdown
Monthly Rent$1,380
Less Expenses−$580
Less Mortgage−$1,002
Monthly Cash Flow$-202
Is Montgomery a Good Place to Invest in Rental Property?
Montgomery, AL has a population of 200,603 and has been growing at 0.2% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $205,000 paired with median rents of $1,380/mo produces an estimated cap rate of 6.29%.
Property taxes at 0.41% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 7.2% runs above average, which increases cash flow volatility and warrants conservative underwriting.
At a price-to-income ratio of 4.6x, homes cost about 4.6 times the local median income of $44,600. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 1.9% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Montgomery offers attractive fundamentals for rental investors. low taxes, and cap rates above 6% put it in the upper tier of investable markets.
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