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What is a good cap rate?

4–5.5% for Class A urban, 5–7% for Class B suburban, 7–10% for Class C tertiary. Higher cap rate generally means higher risk.

Reviewed by Keiron Brown, Founder & Editor, CalculateRealEstateROI · Educational estimates only — not investment, financial, tax, or legal advice

Direct answer

4–5.5% for Class A urban, 5–7% for Class B suburban, 7–10% for Class C tertiary. Higher cap rate generally means higher risk.

Expanded explanation

Cap rate inversely reflects perceived risk and growth potential. A 4% cap in Manhattan reflects deep liquidity and long-term appreciation; a 9% cap in a tertiary market reflects operational difficulty and limited appreciation. There is no universal 'good' cap rate — only good cap rates for a strategy.

Examples

  • 6% cap on Class B Sun Belt multifamily vs 4.5% cap on Class A coastal.

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