Tuscaloosa, AL Cap Rate: 6.73% — Rental Property Analysis
Tuscaloosa is a budget-friendly market in the South with a smaller market with 110,000 residents. At a 6.73% estimated cap rate, this is a solid market where rents of $1,520/mo lag behind home prices. With a median home price of $215,000 and steady population growth supports long-term rental demand, Tuscaloosa 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 $215,000 median price and $1,520/mo median rent
Est. Cap Rate
6.73%
1% Rule
0.71%
Fails
GRM
11.8x
Price / Income
5.0x
Market Data
Median Home Price$215,000
Median Monthly Rent$1,520
Property Tax Rate0.43%
Population110,000
Population Growth0.8% / yr
Median Household Income$42,800
Vacancy Rate6.2%
Annual Appreciation2.4%
2026 Market Update: Tuscaloosa
Tuscaloosa's 0.7% rent-to-price ratio is well below the 1% rule. At median prices of $215,000, the $1,520/mo rent produces only $1,205/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 ($43K) at 7%, estimated monthly cash flow is $61 — a thin 1.7% 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 11.8x gross rent multiplier and 6.2% vacancy rate position Tuscaloosa as a value-oriented market. With annual appreciation at 2.4%, total returns (cash flow + equity growth) run approximately 9.1% before financing leverage.
Cap Rate Calculator — Tuscaloosa
Pre-filled with Tuscaloosa medians. Adjust to match a specific property.
Property Details
$
$
3–8% typical
%
Monthly Expenses
0.43% rate
$
$
8–10% of rent
$
8–12% of rent
$
Cap Rate
5.60%Moderate
Net Operating Income ÷ Purchase Price
NOI / Year
$12,033
net operating income
Gross Rent Multiplier
11.8x
Good (<15)
1% Rule
0.71%
✗ Fails
Monthly Cash Flow
$1,003
before debt service
Annual Breakdown
Gross Rental Income$18,240
Less Vacancy−$1,131
Effective Income$17,109
Less Operating Expenses−$5,076
Net Operating Income$12,033
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Factor in financing to see your actual return on invested capital in Tuscaloosa.
$
$53,750
%
%
years
$
taxes + ins + maint + mgmt
$
$
Cash-on-Cash Return
-3.37%Weak
Annual Cash Flow ÷ Total Cash Invested
Total Cash Invested
$60,200
$53,750 down + $6,450 closing
Monthly Mortgage
$1,051
on $161K loan
Monthly Cash Flow
$-169
after all expenses
Annual Cash Flow
$-2,031
before taxes
Cash Flow Breakdown
Monthly Rent$1,520
Less Expenses−$638
Less Mortgage−$1,051
Monthly Cash Flow$-169
Is Tuscaloosa a Good Place to Invest in Rental Property?
Tuscaloosa, AL has a population of 110,000 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 $215,000 paired with median rents of $1,520/mo produces an estimated cap rate of 6.73%.
Property taxes at 0.43% are well below the national average of ~1.1%, providing a meaningful cash flow advantage many investors overlook. The vacancy rate of 6.2% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 5.0x, homes cost about 5.0 times the local median income of $42,800. This moderate ratio indicates a balanced rent-vs-buy market. Home values have appreciated at roughly 2.4% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: Tuscaloosa 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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