What is a good cap rate? One that beats the going rate for the same property type and city by enough to pay for the extra risk. In the third quarter of 2026, US apartment markets ranged from 4.5 to 8.9 percent around a 6.2 percent index. Enter a deal below to see where it sits.
Cap rate calculator
Enter a price, rent, vacancy and expenses, or type in net operating income if you already have it. The tool shows the cap rate, where it sits against a published range, the price that would hit your target, and what happens when price and rent move.
Cap rate calculator
5.96% sits inside the published range of 4.5% to 8.9%, in the middle half of markets for multifamily (apartments) (Q3 2026). That is 0.24 points below the published 6.2% figure. A cap rate shows price against income, not whether a deal is safe or worth doing.
Cap rate as price and rent move
| Rent / price | -10% | -5% | Same | +5% | +10% |
|---|---|---|---|---|---|
| -10% | 5.51% | 5.22% | 4.96% | 4.73% | 4.51% |
| -5% | 6.07% | 5.75% | 5.46% | 5.20% | 4.96% |
| Same | 6.62% | 6.27% | 5.96% | 5.67% | 5.42% |
| +5% | 7.17% | 6.80% | 6.46% | 6.15% | 5.87% |
| +10% | 7.73% | 7.32% | 6.95% | 6.62% | 6.32% |
Expenses stay fixed as rent moves. If you entered NOI directly, rent changes move NOI by the same percent.
The same deal with a loan
The 5.96% cap rate is below the 8.60% the loan costs each year, so debt lowers your return on these numbers.
Runs in your browser. Nothing is stored or sent. Default deal numbers are an editable example, with vacancy set to the 7.8% U.S. multifamily figure and the loan rate an assumption for an investment property. Range source: Lee & Associates Q3 2026 Market Report, Q3 2026. This compares numbers and is not investment advice.
Key takeaways
- The formula is net operating income divided by price. Income of 30,000 dollars on a 500,000 dollar price is a 6 percent cap rate.
- There is no universal good number. US apartment markets ran from 4.5 percent in Orange County and San Francisco to 8.9 percent in Cleveland in Q3 2026.
- A higher cap rate means more income per dollar of price. It often also means more risk or slower growth, so it is a comparison and not a score.
- Cap rate ignores debt and growth. With the Freddie Mac 30-year average at 7.24 percent on October 29, 2026, a cap rate near 6 percent can produce negative cash flow.
| Property type | Lowest market | Middle half | U.S. figure | Highest market |
|---|---|---|---|---|
| Multifamily | 4.5% (Orange County, San Francisco) | 5.4% to 6.8% | 6.2% | 8.9% (Cleveland) |
| Single-family rental | Not published | Not published | 7.4% | Not published |
| Industrial | 4.9% (Inland Empire) | 6.6% to 8.4% | 7.4% | 10.8% (Detroit) |
| Retail | 5.5% (Orange County, San Francisco) | 6.7% to 8.2% | 7.3% | 9.4% (Lehigh Valley) |
| Office | 6.6% (Miami, New York) | 8.3% to 10.5% | 8.7% | 12.3% (Cleveland, Harrisburg) |
| Self storage | 5.00% to 5.50% (Class A) | 5.75% to 6.50% (Class B) | Not published | 6.75% to 8.00% (Class C) |
What is a good cap rate for rental property?
A good cap rate for rental property is one at or above what similar buildings in the same market trade for, once you have checked that the income is real. For US apartments in Q3 2026, the middle half of markets sat between 5.4 and 6.8 percent. Single-family rentals averaged 7.4 percent in the first quarter.
The market ranges come from Lee & Associates' Q3 2026 Market Report. The single-family figure comes from Arbor's Q2 2026 single-family rental report, which says the rate has risen for 10 straight quarters. That matters if someone is quoting you a number from 2021, when Arbor put the same measure at 5.3 percent.
The spread between cities is the point. Take a building earning 60,000 dollars a year. At Cleveland's 8.9 percent it is worth about 674,000 dollars. At Orange County's 4.5 percent it is worth about 1.33 million. Same income, nearly double the price, because buyers expect different things from each market. A 7 percent deal in Orange County is cheap for that market, so find out why. A 7 percent deal in Cleveland costs more per dollar of income than the market figure, so find out what justifies it.
How do you calculate cap rate?
Divide a year of net operating income by the purchase price. Net operating income is rent collected minus operating costs such as taxes, insurance, repairs, management and utilities you pay. It leaves out mortgage payments, income tax and depreciation.
The calculator's example runs like this. Rent of 4,500 dollars a month is 54,000 dollars a year. Take off 7.8 percent for vacancy, the U.S. multifamily rate in the Lee report, and you collect 49,788 dollars. Subtract 20,000 dollars of expenses and net operating income is 29,788 dollars. Divide by a 500,000 dollar price for 5.96 percent.
Turn the formula around to get a price: net operating income divided by your target cap rate. At 6.5 percent, that same income supports a price of about 458,000 dollars. The expense line is where sellers get creative. Pro formas tend to leave out the management fee when the owner manages it personally, so add one back before you divide.
Cap rate by property type
Cap rate by property type follows how buyers see the risk in each kind of income. In Q3 2026 the U.S. figures ran from 6.2 percent for multifamily to 8.7 percent for office. Office also has the highest top end, 12.3 percent, a fair summary of how buyers feel about office.
- Multifamily. People always need housing and leases reset often, so buyers accept a lower rate.
- Single-family rental. Often higher than apartments: Arbor puts the spread at 185 basis points. One tenant leaving takes all of the rent with it.
- Self storage. The IRR 2026 Self Storage Report splits it by class, from 5 percent for newer multistory buildings up to 8 percent for older, smaller ones.
- Retail and industrial. These often run on long leases, so the tenant's credit and the lease term can matter more than the market figure.
Is a higher cap rate better?
A higher cap rate is not automatically better. It means more income per dollar of price, and buyers usually demand that when a property has more risk, a weaker market, or older systems. A lower cap rate can reflect a stable location where buyers expect rents to grow. Compare like with like before you read anything into the number.
The 12.3 percent office market in the table is not a bargain signal by itself. It is the price of the risk buyers see there. Check why a cap rate is high before you enjoy it: deferred roof, a tenant who stopped paying in August, or taxes that will reset when the sale records.
What cap rate leaves out: debt and growth
Cap rate leaves out two things that decide most returns: your loan and future changes in rent and value. It describes one year of income on an all-cash purchase. That makes it useful for comparing buildings and weak for telling you what you will earn. Use it first, then run cash-on-cash and a longer forecast.
Cap rate vs cash-on-cash return
Cash-on-cash is your yearly cash flow after loan payments, divided by the cash you put in. Use the example deal with 25 percent down and an assumed 7.75 percent investment loan over 30 years. Loan payments come to about 32,240 dollars a year, more than the 29,788 dollars of income. Cash flow is about negative 2,450 dollars, and cash-on-cash is about negative 2 percent, on a deal with a 5.96 percent cap rate.
| Measure | Cap rate | Cash-on-cash |
|---|---|---|
| Includes the loan | No | Yes |
| Includes rent growth | No | No, first year only |
| Cash basis | $500,000 price | $125,000 down |
| Yearly income used | $29,788 NOI | About -$2,450 after loan payments |
| Result | 5.96% | About -2.0% |
This is why the rate on your loan belongs next to the cap rate. The Freddie Mac weekly survey had the 30-year average at 7.24 percent on October 29, 2026. When the yearly cost of a loan runs above the cap rate, borrowing lowers your return, and the calculator says so. Investors can still accept that if they are counting on rent growth, but that is a bet on the future. It should be stated as one.
The other comparison is a low-risk alternative. CBRE's H1 2026 cap rate survey had the 10-year Treasury near 4.6 percent in mid-July 2026. A 5 percent cap rate pays little extra for the leaky faucets. For where the cap rate fits in a full plan, see how to start a rental property business. If the deal needs outside money, a clear cap rate and cash-on-cash sheet is what you bring when you look for real estate investors. This is general education, so check your own deal with your advisor.
What one empty month does to your cap rate
Vacancy is one of the few inputs in the formula you can move after closing. On a building with four units at 1,125 dollars each, one extra month empty costs 1,125 dollars of income. On a 500,000 dollar price, that takes about 0.23 points off the cap rate. At a 6.5 percent cap rate, it is about 17,300 dollars of value if the vacancy became permanent.
You listed the unit on Sunday night. By Monday afternoon there are eleven missed calls, three voicemails, and one text that says is this still available. The renters who got voicemail are calling the next listing. Fast answers will not fix a bad location or a high asking rent. They do stop you from losing tours to a ringing phone.
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For cash flow and debt coverage on the same deal, download the rental property analysis spreadsheet.
To see how markets compare on rent and price, try the rental market ranker. To check a seller's numbers, build a T12.