Paducah, KY Cap Rate 6.52%
Paducah is one of the most affordable markets in the country in the South with a small but investable metro of 50,000. At a 6.52% estimated cap rate, this is a solid market where rents of $1,220/mo lag behind home prices. With a median home price of $170,000 and steady population growth supports long-term rental demand, Paducah 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: Paducah
Paducah's 0.7% rent-to-price ratio is well below the 1% rule. At median prices of $170,000, the $1,220/mo rent produces only $924/mo in NOI. Investors here need to target below-median properties or pursue value-add strategies to make the numbers work.
On a conventional loan with 20% down ($34K) at 7%, estimated monthly cash flow is $20 — a thin 0.7% cash-on-cash return. Investors should negotiate below asking price or target properties with above-median rents to build a meaningful cash flow buffer.
The 11.6x gross rent multiplier and 5.6% vacancy rate position Paducah as a value-oriented market. With annual appreciation at 2.8%, total returns (cash flow + equity growth) run approximately 9.3% before financing leverage.
Deal Modeling & Scenarios for Paducah
All figures below are computed from Paducah'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 $170,000 median price, the annual tax bill is $1,377 — 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 Paducah 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 | $170K | $1,220 | 6.5% |
| Year 1 | $175K | $1,257 | 6.5% |
| Year 2 | $180K | $1,294 | 6.5% |
| Year 3 | $185K | $1,333 | 6.6% |
| Year 4 | $190K | $1,373 | 6.6% |
| Year 5 | $195K | $1,414 | 6.6% |
Three Financing Scenarios
Same median-priced Paducah 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 | $170K | $924 | $11,083 | 6.5% |
| 20% down conventional @ 7% | $39K | $19 | $230 | 0.6% |
| 25% down DSCR @ 8.5% | $49K | $-57 | $-683 | -1.4% |
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) | $128K | $1,037 | $8,213 | 6.4% | $684 |
| At median | $170K | $1,220 | $9,421 | 5.5% | $785 |
| Above median (~125% price) | $213K | $1,403 | $10,628 | 5.0% | $886 |
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 Paducah's historical appreciation rate of 2.8%:
On a $34K down payment, that's a 107.4% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Paducah
Automated checks against the underlying data — surface only the risks that actually apply to Paducah, not generic boilerplate:
Cap Rate Calculator — Paducah
Pre-filled with Paducah medians. Adjust to match a specific property.
Cash-on-Cash Return — Paducah
Factor in financing to see your actual return on invested capital in Paducah.
Is Paducah a Good Place to Invest in Rental Property?
Paducah, 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 $170,000 paired with median rents of $1,220/mo produces an estimated cap rate of 6.52%.
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 3.3x, homes cost about 3.3 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: Paducah offers attractive fundamentals for rental investors. low taxes, and cap rates above 6% put it in the upper tier of investable markets.