What do you want to calculate?
Enter income, expenses, and property value to calculate the capitalization rate. Best for evaluating and comparing properties.
Income
How do you want to enter income?
Annual Operating Expenses
Expense entry mode
All fields are annual figures. Simple total field is not applied.
Often 6–10% of gross rents for residential
Property Value
Calculate cap rate using:
Return on acquisition cost. Use when evaluating a deal before buying.
Acquisition cost only — no financing
Today's estimated value — use for refi or comparison
Saved Scenarios
0/20 saved
No saved scenarios yet
Fill in the calculator above, then save your first scenario.
Cap rate estimates a property's unlevered income yield by comparing annual Net Operating Income with property value. It is commonly used to compare income-producing properties before financing, taxes, appreciation, and investor-specific assumptions are added.
This calculator supports cap rate, implied property value, and required NOI workflows. Results are intended for screening and underwriting support, not as a standalone investment decision or formal valuation.
Texas Cap Rate Calculator: What Investors Need to Know
This calculator estimates cap rate — the ratio of Net Operating Income to property value — for Texas investment properties. Texas has no state income tax, which improves after-tax returns, but property taxes run ~2% for investment property (no homestead exemption), and insurance averages $3,300/yr due to hail, wind, and flood risk. These expenses directly reduce NOI and compress cap rates.
The calculator pre-fills Texas defaults: 8% vacancy, $3,300 insurance, and auto-calculates property tax at 2% of purchase price when you enter a value. Three modes are available: estimate cap rate from NOI, find implied value at a target cap rate, or determine the NOI needed to justify an asking price.
Cap rate measures unlevered yield only. It does not include mortgage payments, appreciation, or tax benefits. For full deal analysis, pair cap rate with DSCR, cash-on-cash return, and the Texas Rental Property Calculator.
Texas-Specific Factors That Affect Cap Rate
Property Tax (~2% for Investment Property)
Texas has no state income tax but charges above-average property taxes. The effective rate per Tax Foundation is 1.4% statewide, but investment properties without homestead exemption pay closer to 2.0-2.3% depending on county. On a $400K property, that is $8,000-$9,200/yr — a significant NOI drag.
Insurance ($3,300/yr Average)
Texas ranks among the most expensive states for property insurance due to hail, tornado, and coastal hurricane risk. The Texas Department of Insurance reports average premiums of $3,291 (2024). Coastal properties near Houston or Corpus Christi may need separate windstorm coverage through TWIA, adding $700-$2,500/yr.
Vacancy (8% Statewide Average)
FRED data shows Texas rental vacancy at 11% (Jan 2025), elevated by new multifamily supply in Austin, DFW, and Houston. For SFR underwriting, 8% is a conservative baseline. Austin and DFW run 4-6%, Houston 6-8%, rural areas can reach 10-12%.
No State Income Tax
Cap rate itself is a pre-tax metric, so the no-income-tax advantage does not change the cap rate number. However, it improves your after-tax cash flow compared to investing in California (13.3%) or New York (8.8%). This is a hold-period benefit, not a cap rate benefit.
No Transfer Tax
Texas does not charge a real estate transfer tax. This lowers acquisition costs by $1,000-$5,000 compared to states like Florida ($0.70/$100) or New York (0.4%-2.9%). Lower acquisition cost does not change cap rate, but it reduces your total cash invested and improves cash-on-cash return.
Texas Cap Rate Benchmarks by Metro (2026)
These ranges reflect SFR and small multifamily (2-4 units) based on Zillow, Redfin, and Texas REALTORS data. Actual cap rates depend on property condition, location within the metro, and expense assumptions.
| Metro | Median Price | Median Rent | Cap Rate Range | Insurance Avg |
|---|---|---|---|---|
| Austin-Round Rock | $440K | $1,750/mo | 4.0-5.5% | $3,100 |
| Dallas-Fort Worth | $410K | $1,850/mo | 5.0-6.5% | $3,400 |
| Houston | $350K | $1,600/mo | 5.5-7.0% | $3,800 |
| San Antonio | $260K | $1,400/mo | 6.0-7.5% | $2,800 |
Sources: Zillow ZHVI/ZORI, Redfin median sale data, Texas REALTORS Market Statistics (Q2 2026). Cap rates modeled with 8% vacancy, 9% PM, 1% maintenance.
Worked Example: Houston Fourplex ($520K)
A 4-unit property in Houston's Third Ward, listed at $520,000. Each unit rents for $1,400/mo. Here is the full NOI breakdown using Texas defaults.
| Gross Rental Income | $67,200/yr | $1,400 × 4 × 12 |
| Vacancy (8%) | -$5,376 | TX avg |
| Effective Gross Income | $61,824 | |
| Property Tax (2%) | -$10,400 | $520K × 2% |
| Insurance | -$5,200 | 4-unit higher than SFR |
| Property Management (9%) | -$5,564 | 9% of EGI |
| Maintenance (1%) | -$5,200 | $520K × 1% |
| Total Expenses | -$26,364 | |
| NOI | $35,460 | |
| Cap Rate | 6.82% | $35,460 / $520,000 |
A 6.82% cap rate in Houston falls in the upper half of the metro range. The fourplex format helps because rent scales faster than expenses — insurance and tax are per-property, not per-unit. For comparison, a single $520K SFR in Austin renting at $2,400/mo would cap at roughly 3.8%.
Worked Example: San Antonio SFR ($285K)
A 3BR/2BA single-family in San Antonio's Southside, listed at $285,000 with market rent of $1,800/mo.
| Gross Rental Income | $21,600/yr | $1,800 × 12 |
| Vacancy (8%) | -$1,728 | |
| EGI | $19,872 | |
| Property Tax (2%) | -$5,700 | |
| Insurance | -$2,800 | SA lower than Houston |
| PM (9%) + Maint (1%) | -$4,639 | |
| Cap Rate | 6.53% | NOI $6,733 / $285K |
San Antonio offers the best rent-to-price ratio among major Texas metros. At $1,800 rent on $285K (0.63% monthly ratio), it clears the floor for positive cash flow with conventional financing. Compare this with Austin where the same $285K buys a property renting for $1,200-$1,400 — yielding a cap rate below 4%.
Texas Cap Rate FAQ
What is a good cap rate in Texas for 2026?
How does Texas property tax affect cap rate?
Why are Austin cap rates lower than Houston?
Does Texas no-income-tax benefit show up in cap rate?
Should I budget for flood insurance in Texas cap rate analysis?
What vacancy rate should I use for Texas cap rate?
How do I compare cap rates between Texas metros?
Sources
- Tax Foundation — Texas effective property tax rates (taxfoundation.org)
- Texas Department of Insurance — Insurance premium data (tdi.texas.gov)
- Federal Reserve FRED — Texas rental vacancy rate (fred.stlouisfed.org)
- Zillow Research — ZHVI and ZORI median values by metro
- Texas REALTORS — Market Statistics Q2 2026