What is the cap rate in Indianapolis, IN?

The median cap rate in Indianapolis, IN is 5.6%. This is based on HUD Fair Market Rents and current home values.

Is Indianapolis a good place to buy rental property?

Indianapolis has a cap rate of 5.6% and estimated cash flow of -$206/month. Returns are moderate — consider the appreciation potential. Median home price is $258,753 with average 3BR rent of $1,760/month.

What is the average rent in Indianapolis, IN?

The HUD Fair Market Rent for a 3-bedroom in Indianapolis, IN is $1,760/month. This represents the estimated rent for standard-quality housing in the area.

Indianapolis, IN — Rental Investment Analysis

🟡MODERATE— average returns

Data: HUD FMR FY2024 + Zillow ZHVI April 2026 + Freddie Mac rates. Last updated June 2026.

Investment Summary

As of 2026, rental properties in Indianapolis, IN yield a 5.6% cap rate. Median home price is $258,753 with 3-bedroom rents at $1,760/month.

Indianapolis is a moderate market — workable but not exceptional for cash flow. Median home price sits at $258,753 — moderate by national standards, requiring a solid down payment but not out of reach. With 3-bedroom rents around $1,760/month, the 5.6% cap rate tells the story. Cash flow is deeply negative at -$206/month with standard assumptions. This market requires appreciation to justify the investment.

At 0.74% on the 1% rule, rents are low relative to purchase prices. You'd need a significant discount from asking price to make the numbers work. DSCR of 0.88 is below 1.0, meaning rental income doesn't cover the mortgage. DSCR lenders will likely decline this market at current prices.

Bottom line: Indianapolis offers a balance of moderate cash flow and growth potential. Good for investors who want some income while building equity over time.

Data sources: HUD Fair Market Rents (FY2024), Zillow Home Value Index (April 2026), Freddie Mac Primary Mortgage Market Survey.

Cap Rate

5.6%

Below average

Monthly Cash Flow

-$206

After all expenses

Price-to-Rent

11.2

Investor-friendly

DSCR

0.88

Fails

Key Metrics

Median Home Price: $258,753
Average Rent (3BR): $1,760/mo
Price-to-Rent Ratio: 11.2(good)
1% Rule: 0.74%(fails — need 1%+)
Cash-on-Cash Return: -3.4%
Vacancy Rate: 8.0%

Market Strength

Unemployment Rate: 3.2%(-1.1% vs national)
Rent Growth (YoY): +2.9%(national avg)
Population Growth: +0.4% YoY

Assumptions Used

20% down, 6.52% rate, 30yr, 8% vacancy, 10% maintenance

Customize these numbers →

Property Tax Rate

0.81%

of assessed value (IN avg)

Median Income

$61,944

household (IN avg)

Rent-to-Income

34.1%

Moderate

Section 8 Max Rent

$1,760/mo

3BR voucher payment

IN Investor Climate

Landlord Friendly

8/10

State Income Tax

Has state tax

Property Tax

0.81% effective

Population Trend

+0.4% (3yr)

Population Movement (Tax Year 2021→2022)

Net Migration

-4,121 households

SHRINKING

Total Inflow

16,196

households moved in

Avg Income (New Residents)

$59,377

per household

Where they're coming from:

1.Hamilton, IN2,879 households · avg $75,978

2.Johnson, IN2,253 households · avg $51,502

3.Hendricks, IN2,039 households · avg $49,948

4.Hancock, IN841 households · avg $91,527

5.Cook, IL551 households · avg $73,125

Where residents are leaving to:

1.Hamilton, IN4,193 households

2.Hendricks, IN3,060 households

3.Johnson, IN2,875 households

4.Hancock, IN1,373 households

5.Boone, IN824 households

Net outflow may indicate weakening demand — but can mean lower prices and higher cap rates.

Best Zip Codes in Indianapolis for Investors

46218

Cap Rate: 11.0%Cash Flow: +$450/mo$116,896

46222

Cap Rate: 10.7%Cash Flow: +$461/mo$128,674

46241

Cap Rate: 8.6%Cash Flow: +$294/mo$159,549

All Zip Codes in Indianapolis

Zip	Cap Rate	Cash Flow	Home Price	Rent (3BR)	DSCR
46218	11.0%	+$450	$116,896	$1,510/mo	1.72
46222	10.7%	+$461	$128,674	$1,620/mo	1.67
46241	8.6%	+$294	$159,549	$1,670/mo	1.35
46201	8.3%	+$253	$155,952	$1,590/mo	1.30
46231	8.0%	+$358	$259,605	$2,570/mo	1.26
46226	7.7%	+$183	$165,086	$1,580/mo	1.21
46203	7.2%	+$122	$171,756	$1,560/mo	1.13
46225	7.2%	+$119	$175,833	$1,590/mo	1.13
46208	6.9%	+$81	$180,246	$1,580/mo	1.08
46219	6.3%	-$14	$189,470	$1,540/mo	0.99
46221	6.3%	-$16	$211,625	$1,720/mo	0.99
46234	5.8%	-$129	$280,703	$2,150/mo	0.91
46113	5.7%	-$151	$279,103	$2,110/mo	0.90
46254	5.7%	-$121	$222,327	$1,680/mo	0.90
46217	5.7%	-$142	$259,572	$1,960/mo	0.90
46229	5.7%	-$135	$219,579	$1,640/mo	0.88
46204	5.6%	-$229	$346,667	$2,570/mo	0.88
46228	5.5%	-$206	$272,675	$1,990/mo	0.86
46268	5.4%	-$216	$255,897	$1,840/mo	0.84
46237	5.3%	-$247	$261,738	$1,850/mo	0.82
46214	5.2%	-$222	$232,477	$1,640/mo	0.82
46227	5.1%	-$241	$230,423	$1,600/mo	0.80
46235	5.0%	-$249	$218,316	$1,490/mo	0.79
46205	5.0%	-$301	$258,753	$1,760/mo	0.78
46239	4.9%	-$367	$295,397	$1,980/mo	0.77
46250	4.4%	-$540	$330,844	$2,060/mo	0.69
46202	4.3%	-$614	$351,449	$2,140/mo	0.67
46259	4.1%	-$708	$375,112	$2,220/mo	0.65
46260	4.0%	-$611	$309,668	$1,800/mo	0.63
46220	3.9%	-$718	$346,227	$1,970/mo	0.61
46240	3.9%	-$772	$368,897	$2,090/mo	0.61
46256	3.1%	-$958	$347,808	$1,690/mo	0.48
46278	3.0%	-$1,211	$429,186	$2,050/mo	0.47