What Kind of Cap Rate Should I Expect in Indianapolis?

Share this post

Facebook
Twitter
LinkedIn
Email

We work with a lot of investors throughout the United States and throughout the world. A question we receive from many new to the Central Indiana market is: What kind of cap rate should I expect in Indianapolis?

As most of you know, the cap rate simply measures the annual net income of a property divided by the purchase price.

Related: The Definitive Guide to Investing in Indianapolis

How to Calculate a Cap RateHow to calculate cap rate in indianapolis

For example, let’s say you are considering a property that’s listed for sale for $90,000.

You determine that the home will rent for $1,100 per month, so your gross income would be $13,200 per year.

To get your net income, you would simply account for your expenses, which could include:

Property Management = $1,320

Taxes = $1,800

Insurance = $750

Maintenance = $1,980

Total Expense = $5,850

Net Income = $7,350

Cap Rate = $7,350/$90,000 = 8.2%

Indianapolis Investors Expect an 8%-10% Cap Rate

Generally, anything in the 8%-10% cap range is a good cap rate for Indianapolis. Some investors, especially those who are interesting in buying in nicer areas, are settling for smaller cap rates.

A few years ago, before the influx or corporate investors, you could have gotten between 10%-12% pretty easily. However, the increased competition has increased competition, which has increased prices.

If you have any questions about cap rates or investing in Indianapolis, please let us know.

Investing in Central Indiana eBook

About the Author

Jeremy Tallman

Jeremy is the Chief Executive Officer and Managing Broker for T&H Realty Services. He has been active in the Central Indiana real estate market since 2000 and leads one of the most successful single-family property management companies in the state.

Leave a Reply

Your email address will not be published. Required fields are marked *

Featured Articles

Subscribe for the Latest Real Estate Insights

Skip to content