Payson, AZ Cap Rate 4.48%
Payson is a higher-priced market in the West with a small but investable metro of 50,000. At a 4.48% estimated cap rate, this is a moderate market where rents of $1,970/mo lag behind home prices. With a median home price of $380,000 and steady population growth supports long-term rental demand, Payson offers opportunities for investors who source deals carefully.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Payson
Payson's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $380,000, the $1,970/mo rent produces only $1,419/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 ($76K at 7%) would result in approximately $-603/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.
With 1.6% annual population growth paired with 3% home appreciation, Payson offers a rare combination of current cash flow and future equity upside. The 16.1x gross rent multiplier suggests the market hasn't fully priced in this growth trajectory.
Deal Modeling & Scenarios for Payson
All figures below are computed from Payson's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 0.63% effective rate on the $380,000 median price, the annual tax bill is $2,394 — that's below national average (-41% 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 Payson continues appreciating at 3%/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 | $380K | $1,970 | 4.5% |
| Year 1 | $391K | $2,029 | 4.5% |
| Year 2 | $403K | $2,090 | 4.5% |
| Year 3 | $415K | $2,153 | 4.5% |
| Year 4 | $428K | $2,217 | 4.5% |
| Year 5 | $441K | $2,284 | 4.5% |
Three Financing Scenarios
Same median-priced Payson 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 | $380K | $1,419 | $17,024 | 4.5% |
| 20% down conventional @ 7% | $87K | $-603 | $-7,235 | -8.3% |
| 25% down DSCR @ 8.5% | $110K | $-773 | $-9,276 | -8.4% |
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) | $285K | $1,675 | $12,944 | 4.5% | $1,079 |
| At median | $380K | $1,970 | $14,762 | 3.9% | $1,230 |
| Above median (~125% price) | $475K | $2,266 | $16,589 | 3.5% | $1,382 |
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 Payson's historical appreciation rate of 3%:
On a $76K down payment, that's a 62.0% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Payson
Automated checks against the underlying data — surface only the risks that actually apply to Payson, not generic boilerplate:
Cap Rate Calculator — Payson
Pre-filled with Payson medians. Adjust to match a specific property.
Cash-on-Cash Return — Payson
Factor in financing to see your actual return on invested capital in Payson.
Is Payson a Good Place to Invest in Rental Property?
Payson, AZ has a population of 50,000 and has been growing at 1.6% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $380,000 paired with median rents of $1,970/mo produces an estimated cap rate of 4.48%.
Property taxes at 0.63% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 5% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.7x, homes cost about 5.7 times the local median income of $66,955. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 3% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Payson presents moderate opportunities. Cap rates near 4.48% mean deals need careful sourcing — look for value-add rehabs or emerging neighborhoods where rents are climbing.