What Kind of Cap Rate Should I Expect in Indianapolis?

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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.

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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.

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