Mount Sterling, KY Cap Rate 5.90%
Mount Sterling is a budget-friendly market in the South with a small but investable metro of 50,000. At a 5.90% estimated cap rate, this is a solid market where rents of $1,260/mo lag behind home prices. With a median home price of $190,000 and steady population growth supports long-term rental demand, Mount Sterling 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
Market Data
2026 Market Update: Mount Sterling
Mount Sterling's 0.7% rent-to-price ratio is well below the 1% rule. At median prices of $190,000, the $1,260/mo rent produces only $935/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 ($38K at 7%) would result in approximately $-76/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 12.6x gross rent multiplier and 5.6% vacancy rate position Mount Sterling as a value-oriented market. With annual appreciation at 2.8%, total returns (cash flow + equity growth) run approximately 8.7% before financing leverage.
Deal Modeling & Scenarios for Mount Sterling
All figures below are computed from Mount Sterling's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.81% effective rate on the $190,000 median price, the annual tax bill is $1,539 — that's below national average (-24% 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 Mount Sterling continues appreciating at 2.8%/yr while rents grow at a conservative 3%/yr, cap rate holds roughly steady as price growth outpaces rent. Year-by-year projection at the median:
| Year | Est. Price | Est. Rent/Mo | Cap Rate |
|---|---|---|---|
| Today | $190K | $1,260 | 5.9% |
| Year 1 | $195K | $1,298 | 5.9% |
| Year 2 | $201K | $1,337 | 5.9% |
| Year 3 | $206K | $1,377 | 5.9% |
| Year 4 | $212K | $1,418 | 5.9% |
| Year 5 | $218K | $1,461 | 6.0% |
Three Financing Scenarios
Same median-priced Mount Sterling 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 | $190K | $935 | $11,214 | 5.9% |
| 20% down conventional @ 7% | $44K | $-76 | $-915 | -2.1% |
| 25% down DSCR @ 8.5% | $55K | $-161 | $-1,936 | -3.5% |
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) | $143K | $1,071 | $8,352 | 5.9% | $696 |
| At median | $190K | $1,260 | $9,555 | 5.0% | $796 |
| Above median (~125% price) | $238K | $1,449 | $10,758 | 4.5% | $897 |
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 Mount Sterling's historical appreciation rate of 2.8%:
On a $38K down payment, that's a 92.0% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Mount Sterling
Automated checks against the underlying data — surface only the risks that actually apply to Mount Sterling, not generic boilerplate:
Cap Rate Calculator — Mount Sterling
Pre-filled with Mount Sterling medians. Adjust to match a specific property.
Cash-on-Cash Return — Mount Sterling
Factor in financing to see your actual return on invested capital in Mount Sterling.
Is Mount Sterling a Good Place to Invest in Rental Property?
Mount Sterling, KY has a population of 50,000 and has been growing at 0.8% annually — roughly in line with national trends, meaning demand is stable but not exceptional. The median home price of $190,000 paired with median rents of $1,260/mo produces an estimated cap rate of 5.90%.
Property taxes at 0.81% fall within the national average range and shouldn't present unusual challenges. The vacancy rate of 5.6% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 3.7x, homes cost about 3.7 times the local median income of $51,300. 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 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: Mount Sterling presents moderate opportunities. Cap rates near 5.90% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.