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What is a good cap rate?

Short answer, 5–7% is a solid range for single-family rentals in 2026. Below that you are paying for appreciation or safety; above 8% usually means a cheaper, higher-risk market. The right number is the one that pays you fairly for the risk you take.

Highest tracked cap rate

5.7% Cleveland

Lowest tracked cap rate

3.5% Austin

Metros tracked

Metros clearing 1.2 DSCR

Live Zillow data across 18 U.S. metros. See the Investor Yield Index for the full table.

Cap rate benchmarks

Cap rate	Typical market	Trade-off
3–5%	Prime coastal / hot Sun Belt	Low yield, strong appreciation, high competition
5–7%	Solid secondary markets	Balanced yield and stability, the 2026 norm
7–9%	Midwest / lower-cost South	Stronger cash flow, slower appreciation, more management
9%+	Rougher / declining areas	High yield on paper, higher vacancy and risk

Bands are illustrative. The Investor Yield Index shows where today’s cap rates actually fall by metro.

A good cap rate is relative to risk

A 9% cap rate looks great until you price in the higher vacancy, turnover, and maintenance of the markets that produce it. The better question is not which deal shows the highest cap rate, but which cap rate pays you fairly for the risk you are taking. A 5% cap in a prime market can beat an 8% cap in a declining one once you count repairs and empty months.

The 2026 catch. At a 6.8% mortgage rate, every one of the 18 metros we track runs negative cash-on-cash on a 25% down purchase, even the ones with healthy cap rates. A good cap rate on paper does not guarantee positive cash flow after financing, which is why the Index blends cap rate, yield, DSCR, and cash-on-cash instead of trusting any single number.

See the math at the cap rate formula, then compare it with cash-on-cash return.

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Common questions

Is a higher cap rate always better?

Not necessarily. Very high cap rates often signal higher risk, rougher neighborhoods, older stock, or weaker appreciation. A 5% cap in a prime market can outperform an 8% cap in a declining one.

What cap rate do lenders want for DSCR loans?

There is no fixed cap-rate rule, but lenders look for a 1.2 DSCR. At 2026 financing that takes a cap rate well into the high-single digits, and none of the 18 metros in our Investor Yield Index reach it today. The strongest, Cleveland, sits near a 0.98 DSCR.

Cap rate vs. cash-on-cash, which is “good”?

Cap rate gauges the property; cash-on-cash gauges your financed return. In a high-rate year, a “good” cap rate can still mean a negative cash-on-cash. Watch both.