How to Analyze Cap Rates and Rents in Texarkana

Are you trying to figure out if a rental in Texarkana will cash flow? With prices, taxes, and insurance moving, it can be tough to read the numbers with confidence. This guide shows you how to analyze cap rates and rents using local data points, so you can compare deals apples to apples. You’ll get simple steps, a quick example, and the key Texarkana assumptions investors use. Let’s dive in.

What cap rate means

Cap rate tells you the first-year return on an all-cash basis. It helps you compare properties quickly.

The basic formula

• Cap rate = Net Operating Income (NOI) ÷ Purchase price.
• NOI = Effective gross income minus operating expenses. Mortgage payments and depreciation are not in NOI. See the full definition on Investopedia’s income approach page.

How investors use it

• Going-in cap rate = first-year stabilized NOI ÷ purchase price.
• Price from cap rate = NOI ÷ cap rate.
• Cap rate reflects risk, liquidity, and growth expectations. Higher cap rates usually mean higher perceived risk and lower growth assumptions.

Texarkana market snapshot

Texarkana is a small regional metro with a diversified economy that includes health care, manufacturing, and defense. For employer context, see the Texarkana USA Chamber’s major employers list.

For quick rent benchmarking, Zillow’s Texarkana page shows an average asking rent around $1,330 per month in the recent snapshot used for this report. Use it as a starting point, then confirm with current local comps on a unit-by-unit basis. Check the latest on Zillow’s Texarkana market page.

A recent appraisal excerpt cited in an SEC filing reported the Texarkana multifamily submarket vacancy at about 8.7% and average rent per unit in the high-$800s. Treat this as a market-level baseline and adjust for property specifics. See the Q1 2025 reference in the SEC filing.

On expenses, the City of Texarkana FY2025 budget sets the city levy at $0.6500 per $100 of assessed value. Total property tax rates in many city parcels often land above 2% of assessed value when you combine city, county, school, and special districts. Always pull the parcel’s exact jurisdictions from the Bowie Central Appraisal District. Review the city rate in the FY2025 budget.

Neighborhood incomes vary across ZIP codes, so demand and achievable rents differ by submarket. Use ACS-derived ZIP data as context when you set rents and marketing strategy. A ZIP-level starting point is available via SimpleMaps’ Texarkana ZIP data.

Underwrite rents step by step

1. Pull current comps by unit type and location. Use Zillow (ZORI for a city-wide baseline), for-rent MLS data, and active listings.
2. Compute Gross Potential Rent (GPR): monthly market rent by unit times 12 months.
3. Apply vacancy and credit loss. For Texarkana multifamily, start near 8 to 9% based on the cited 8.7% market vacancy, then adjust for condition and leasing risk.
4. Subtract concessions and collection loss if comps show them.
5. Add other income (parking, pet fees, laundry) to get Effective Gross Income (EGI).
6. Subtract operating expenses to reach NOI.

Expenses to watch in Texarkana

• Property taxes: confirm assessment and jurisdictions at the parcel level. City portion is published; combine with county, ISD, and special districts to estimate the full bill.
• Insurance: obtain local quotes. Costs can be a material swing factor in pro formas.
• Utilities and services: owner-paid utilities, trash, landscaping, contracts.
• Repairs and maintenance: include turns and routine upkeep.
• Management fees: get local proposals; small properties often carry higher percentages.
• Reserves and recurring capex: budget annually for systems, roofs, and interiors.

Industry data shows multifamily operating-expense ratios often run from the mid-30% range up to 50% or more, depending on age and local taxes and insurance. Use this as a starting band, then reconcile to actuals. For broad context, see industry indicators summarized by NCREIF.

Quick back-of-envelope example

Below is a simple, transparent illustration. Always replace these inputs with your property’s actual comps and quotes.

Assume a 4-unit property with market rent estimated at $1,330 per unit per month, based on the recent Zillow Texarkana snapshot.

• GPR: $1,330 × 4 × 12 = $63,840.
• Vacancy at 9%: $5,746. Effective Gross Income: $58,094.
• Operating expenses at 45% of EGI: $26,142.
• NOI: $31,952.

If the asking price is $475,000, the going-in cap rate is $31,952 ÷ $475,000 ≈ 6.7%. Compare this result to recent local sales and your target band before you move forward. You can also vary rent by plus or minus 5 to 10%, vacancy by 2 to 5 points, and expense ratio by 5 points to see how sensitive the return is to market changes.

For baseline inputs, reference Zillow’s Texarkana page for asking-rent context and the SEC-cited vacancy snapshot for a market-level vacancy starting point.

Set your cap-rate target

There is no single “Texarkana cap rate.” Use recent local sales first. If you need a starting point, tertiary-market multifamily deals have often traded above primary-market levels, with many stabilized assets underwriting in the mid-6% range and higher for value-add or older properties. Use this only as directional context and then anchor to local comps. For industry commentary on cap-rate trends, see this CRE Daily cap rate brief.

Local pitfalls to avoid

• Small-market liquidity: sales comps may be sparse or older. Confirm with local brokers and recorded deeds.
• Expense sensitivity: tax reassessments and insurance changes can quickly alter NOI in a lower-rent market. Stress test those lines.
• Submarket variation: ZIP-level incomes and rent demand vary. Underwrite by micro-location instead of a single city-wide rent figure.

Texarkana underwriting checklist

1. Define the asset and plan: stabilized hold, value-add, or SFR.
2. Pull parcel data: assessment and taxing jurisdictions from Bowie CAD; reference the city levy in the FY budget.
3. Gather rent comps: Zillow, for-rent MLS, and current multifamily listings.
4. Set vacancy: start near 8 to 9% and adjust for property risk.
5. Build the pro forma: GPR to EGI to NOI.
6. Choose a target cap-rate band: cross-check with recent local transactions.
7. Run sensitivities: rents, vacancy, expenses, and exit cap.
8. Validate assumptions: talk with local brokers, appraisers, and property managers.

Work with a local advisor

If you want help pulling real Texarkana comps, pressure-testing expenses, or pricing a purchase or sale, reach out. I combine local market knowledge, data-informed pricing, and polished marketing to guide investor decisions with clarity. Connect with Colton Daffern to talk through your numbers and next steps.

FAQs

What is a cap rate and how do I calculate it?

• Cap rate equals NOI divided by the purchase price, where NOI is effective gross income minus operating expenses and excludes mortgage payments and depreciation.

What vacancy rate should I use for Texarkana rentals?

• Use the market-level multifamily vacancy near 8 to 9% as a baseline, based on a cited 8.7% snapshot, then adjust for property condition and leasing risk.

How do I estimate property taxes for a Texarkana investment?

• Pull the parcel’s assessed value and taxing jurisdictions from Bowie CAD and apply each rate; the city levy is 0.6500 per $100, with total rates often above 2% depending on districts.

What is a reasonable cap-rate target in a tertiary market like Texarkana?

• Stabilized multifamily often underwrites in the mid-6% range, with higher caps for value-add or older assets; always anchor to recent local comps.

How do rents vary across Texarkana neighborhoods?

• Rents and demand differ by ZIP-level income and unit mix; use ZIP-level ACS indicators and street-level comps to set realistic market rents for each micro-location.