What is a good cap rate for rental property?
A good cap rate is 5–8% in most US markets in 2026. Primary-metro class-A property trades at 4–5.5%, secondary-market multifamily at 6–8%, and anything above 10% usually signals higher vacancy, deferred maintenance or a weaker submarket rather than a bargain.
Cap rate bands by property profile
| Property profile | Cap rate | Read |
|---|---|---|
| Class A, primary metro | 4.0–5.5% | Priced for stability |
| Class B, secondary metro | 5.5–7.5% | Balanced risk/return |
| Class C / value-add | 7.5–10% | Capex and vacancy risk |
| Small multifamily, tertiary | 8–11% | Thin resale market |
| Short-term rental converted | Not comparable | Use cash-on-cash |
How to read this table
- Small multifamily, tertiary sits at the top of the table (8–11%) — thin resale market. If your situation looks like this row, plan against the upper half of the range rather than the midpoint.
- Class A, primary metro anchors the bottom (4.0–5.5%) — priced for stability. Treat this as the conservative case you should still be profitable at.
- The gap between the top and bottom row is roughly 2.8×. That spread is why a single blended average is close to useless here — pick the row that matches your setup instead of averaging the column.
- Most rows are ranges, not single figures. The low end usually reflects a weaker month, a softer audience geography, or an unoptimised setup; the high end reflects a well-run, well-targeted operation of the same size.
- With 5 reference points in the "cap rate bands by property profile" table, the fastest way to use this page is to find the closest row, take its cap rate, then stress-test it ±30% before you build a plan on it.
Context
Cap rate is net operating income divided by price, and it deliberately excludes financing — which makes it a clean way to compare properties and a poor way to judge your actual return. Two investors buying the same building at a 6.5% cap can end up with wildly different cash-on-cash returns depending on leverage and rate. The other trap is an NOI built on optimistic assumptions: understated vacancy, no capital reserve, and self-managed labour costed at zero can inflate a stated cap rate by two full points.
What moves this number
Financing terms
Rate, down payment and amortisation drive cash-on-cash return more than purchase price does. The same building can cash-flow or bleed depending on the loan.
True operating expense ratio
Management, insurance, tax, maintenance, vacancy and capital reserve typically consume 35–50% of gross rent. Models that skip reserves overstate returns badly.
Vacancy and turnover
One 45-day vacancy plus a turn can erase a year of thin cash flow. Underwrite 5–8% vacancy even in tight markets.
Local regulation
Rent rules, short-term rental caps and licensing requirements change the achievable revenue of an identical property between neighbouring cities.
Methodology
Net operating income after vacancy, management, insurance, tax and a capital reserve, divided by purchase price, benchmarked across market tiers.
Assumptions and caveats
- Returns exclude appreciation and principal paydown unless a row states otherwise.
- Local tax, insurance and regulation can move these figures by several points in either direction.
- This page was last reviewed on 2026-08-12. Ranges are updated as new data lands, so re-check before using them in a contract or a plan.
- Use these numbers as a starting range, not a guarantee — your own historical data always beats a benchmark.
Frequently asked questions
What is a good cap rate for rental property?
A good cap rate is 5–8% in most US markets in 2026. Primary-metro class-A property trades at 4–5.5%, secondary-market multifamily at 6–8%, and anything above 10% usually signals higher vacancy, deferred maintenance or a weaker submarket rather than a bargain.
Which option pays the most in the cap rate bands by property profile table?
Small multifamily, tertiary, at 8–11% (Thin resale market). That row represents the strongest case in this dataset, so use it as an upper bound rather than an expectation.
What is a realistic low-end figure?
Class A, primary metro at 4.0–5.5% (Priced for stability). Plan your costs so the low end still works, then treat anything above it as upside.
Why do the numbers vary so much?
The spread between the highest and lowest row is about 2.8×. Financing terms and true operating expense ratio explain most of that gap — see the drivers section above for the full list.
Where do these numbers come from?
Net operating income after vacancy, management, insurance, tax and a capital reserve, divided by purchase price, benchmarked across market tiers.
How can I estimate my own number instead of using a benchmark?
Use the Cap Rate Calculator on RevenueLab — it takes your own inputs and returns a figure specific to your setup, which is always more accurate than a published range.
Model your own numbers
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- How much money do you need to buy a rental property?
- How much do real estate agents make per sale?
Last updated 2026-08-12.