Short answer: a good cap rate is usually between 5% and 10%. Below 5% often means you're paying for appreciation or a premium location; above 10% usually means higher risk, a rougher area, or a value-add opportunity. But "good" always depends on the market, the asset, and your strategy.
Cap rate (capitalization rate) is the property's net operating income (NOI) divided by its price:
NOI is your annual rental income minus operating expenses — taxes, insurance, maintenance, property management, and vacancy. It does not include your mortgage. A simple shortcut: assume operating expenses eat roughly 35–45% of rent.
| Cap rate | What it usually means |
|---|---|
| 3–5% | Premium/appreciation markets (coastal metros). Low cash flow, betting on growth. |
| 5–8% | The sweet spot for most rentals — solid cash flow with reasonable risk. |
| 8–10%+ | Higher yield, higher risk — secondary markets or value-add deals. |
Two deals with the same cap rate can be very different once you factor in financing. Cap rate ignores your mortgage, so always pair it with cash-on-cash return and monthly cash flow to see what actually hits your pocket. A 6% cap rate with positive cash flow beats a 9% cap rate that bleeds $400/month.
Running these numbers by hand for every listing is slow. PropVision does it instantly — paste any address and get the cap rate, cash flow, rent estimate, and a clear buy-or-skip verdict in about 10 seconds, using real market data.
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