Tyler, TX Cap Rate 3.20%
Tyler is the regional anchor for East Texas — the medical, education, retail, and services hub for a wide rural-anchored geographic area. The 3.20% cap rate at a $265,000 median price keeps the 0.51% rent-to-price ratio close to functional. Population growth at 1.8%/yr is steady, helped by continued regional consolidation and DFW-adjacent commuter migration.
Employment is anchored by UT Health East Texas (the academic medical center serving most of East Texas, part of the UT Health system — a major regional employer with continuing capacity expansion), Christus Mother Frances Hospital and the broader Tyler medical corridor, the University of Texas at Tyler and Tyler Junior College, Brookshire Grocery Company (the Texas/Louisiana/Arkansas grocery chain headquartered here), Sanderson Farms / Wayne-Sanderson Farms poultry operations, the broader Smith County government, and a meaningful oil-and-gas services base tied to East Texas production. Tyler also holds the historic title of "Rose Capital of America" — the rose-growing industry persists with related tourism (the Texas Rose Festival each October). Submarkets stratify cleanly: the Azalea District is walkable urban-historic with strong appreciation; the South Tyler / Cumberland area is premium suburban-school; the West Tyler / Bullard area draws professional family rentals; the North Tyler and Eastside zones offer deeper-value workforce inventory; the broader Smith County extends with newer construction.
Texas has no state income tax (a structural cash-flow advantage). Property tax at 1.72% is on the higher end nationally (Texas property tax compensates for no state income tax). Smith County's appraisal cycle is annual; new buyers don't inherit seller's lower assessment. Insurance is reasonable but verify hail / severe-weather deductible structure. The structural advantages: durable UT Health + university + grocery + agribusiness employer mix; regional-hub role concentrates retail and services employment that wouldn't otherwise exist at this metro size; cost basis is materially below DFW (Tyler is ~100 miles southeast of DFW with limited commuter integration). The structural risks: rural East Texas demographic trajectory has been weaker than the broader state; oil-and-gas services employment is cyclical. For investors who want Texas tax structure outside the major metros' price compression, Tyler is a defensible East Texas option.
Market data powered by Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI) · Updated Feb 2026
Market Data
2026 Market Update: Tyler
Tyler's 0.5% rent-to-price ratio is well below the 1% rule. At median prices of $265,000, the $1,340/mo rent produces only $706/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 ($53K at 7%) would result in approximately $-704/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.
Property taxes consume 28% of gross rent here — one of the highest ratios in our dataset. This significantly compresses margins and makes Tyler a market where tax-conscious underwriting is essential. Every deal should be stress-tested with potential assessment increases.
Deal Modeling & Scenarios for Tyler
All figures below are computed from Tyler's real market medians. Use them as a baseline; override with property-specific numbers in the calculators.
Property Tax Bill in Real Dollars
At 1.72% effective rate on the $265,000 median price, the annual tax bill is $4,558 — that's very high (top 15% of US markets) (+62% 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 Tyler continues appreciating at 2.7%/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 | $265K | $1,340 | 3.2% |
| Year 1 | $272K | $1,380 | 3.2% |
| Year 2 | $280K | $1,422 | 3.2% |
| Year 3 | $287K | $1,464 | 3.2% |
| Year 4 | $295K | $1,508 | 3.2% |
| Year 5 | $303K | $1,553 | 3.2% |
Three Financing Scenarios
Same median-priced Tyler 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 | $265K | $706 | $8,469 | 3.2% |
| 20% down conventional @ 7% | $61K | $-704 | $-8,448 | -13.9% |
| 25% down DSCR @ 8.5% | $77K | $-823 | $-9,871 | -12.8% |
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) | $199K | $1,139 | $6,475 | 3.3% | $540 |
| At median | $265K | $1,340 | $6,957 | 2.6% | $580 |
| Above median (~125% price) | $331K | $1,541 | $7,438 | 2.2% | $620 |
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 Tyler's historical appreciation rate of 2.7%:
On a $53K down payment, that's a 21.5% total ROI over 5 years (not annualized). Tax benefits from depreciation are additional and depend on your personal tax bracket.
Risk Flags Specific to Tyler
Automated checks against the underlying data — surface only the risks that actually apply to Tyler, not generic boilerplate:
Cap Rate Calculator — Tyler
Pre-filled with Tyler medians. Adjust to match a specific property.
Cash-on-Cash Return — Tyler
Factor in financing to see your actual return on invested capital in Tyler.
Is Tyler a Good Place to Invest in Rental Property?
Tyler, TX has a population of 50,000 and has been growing at 1.8% annually — above the national average, suggesting steady demand pressure on housing. The median home price of $265,000 paired with median rents of $1,340/mo produces an estimated cap rate of 3.20%.
Property taxes at 1.72% are notably high and represent a significant drag on cash flow — model this expense carefully, as it can make or break a deal. The vacancy rate of 5.8% is moderate and within normal parameters for a healthy rental market.
At a price-to-income ratio of 4.2x, homes cost about 4.2 times the local median income of $63,735. 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 2.7% annually. Steady appreciation means total returns will be primarily cash flow-driven — the more sustainable model for long-term wealth building.
Bottom line: At current median prices, Tyler is challenging for pure cash flow investing. Consider BRRRR strategies with below-market purchases, or look at neighboring metros with stronger price-to-rent ratios.