Cap rates by city: the 2026 map
Cap rates on single-family rentals range from roughly 3.5% in coastal markets like San Diego to 9% to 10% in Midwest cash-flow cities like Cleveland. The spread reflects differences in growth expectations, risk, and property taxes, not a simple scale from bad to good.
One of the most common questions investors ask is "what cap rate should I expect?" The answer depends almost entirely on where you are buying. A 5% cap rate in Austin is perfectly normal. A 5% cap rate in Memphis means something is wrong with the deal. For a breakdown of what counts as a good cap rate in general, start there. This table gives you the local context you need to calibrate your expectations.
Cap rates by city: single-family rentals (2025 to 2026)
These ranges reflect stabilized single-family rental properties at market rents. Actual cap rates vary by neighborhood, condition, and deal specifics, but these ranges show where the market generally prices for each metro.
Tier 1: High cash-flow markets (7% to 10%)
Affordable prices, solid rents relative to price, slower appreciation. These are the markets where the monthly check does the work.
| City | Typical cap rate | Key driver |
|---|---|---|
| Cleveland, OH | 8% to 10% | Very affordable prices, diversifying economy |
| Detroit, MI | 8% to 11% | Rock-bottom entry, revitalization in pockets, high risk outside core |
| Memphis, TN | 7% to 9% | Deep investor market, logistics hub, strong rental demand |
| Birmingham, AL | 7% to 9% | Low prices, medical and education anchors |
| Indianapolis, IN | 7% to 8.5% | Affordable, diversified economy, steady population |
| Kansas City, MO | 6.5% to 8.5% | Low cost of living, balanced market |
| St. Louis, MO | 7% to 9% | Affordable entry, pockets of strong rental demand |
Tier 2: Balanced markets (5% to 7%)
Moderate cash flow and moderate appreciation. These markets offer a mix of both return engines without betting heavily on either.
| City | Typical cap rate | Key driver |
|---|---|---|
| Tampa, FL | 5.5% to 7% | Population growth, but rising insurance and property taxes |
| Jacksonville, FL | 5.5% to 7% | Military base, logistics, affordable relative to South FL |
| San Antonio, TX | 5.5% to 7% | Military, healthcare, affordable with steady growth |
| Charlotte, NC | 5% to 6.5% | Banking hub, strong in-migration, tightening slightly |
| Raleigh, NC | 5% to 6.5% | Research Triangle, tech employment, high demand |
| Phoenix, AZ | 5% to 6.5% | Massive growth, prices have risen faster than rents recently |
| Atlanta, GA | 5% to 7% | Large metro, varied sub-markets, strong rental pool |
| Dallas-Fort Worth, TX | 5% to 6.5% | Corporate relocations, no state income tax, population boom |
Tier 3: Appreciation markets (4% to 5.5%)
Prices have outrun rents, so current yield is thin. Investors here are buying for growth, paydown, and tax advantages, not monthly cash flow.
| City | Typical cap rate | Key driver |
|---|---|---|
| Austin, TX | 4% to 5.5% | Tech-driven growth, but corrected from 2022 peak |
| Nashville, TN | 4.5% to 6% | Healthcare, entertainment, strong in-migration |
| Denver, CO | 4% to 5% | Outdoor lifestyle appeal, tight supply, high prices |
| Boise, ID | 4% to 5.5% | Migration from coastal markets, limited supply |
| Salt Lake City, UT | 4% to 5.5% | Young population, tech growth, LDS community stability |
Tier 4: Premium / coastal (3% to 5%)
The most expensive markets where cash flow is typically negative on a financed deal. Investors are betting on long-term appreciation and tax benefits.
| City | Typical cap rate | Key driver |
|---|---|---|
| Miami, FL | 4% to 5.5% | International demand, limited land, no state income tax |
| San Diego, CA | 3.5% to 5% | Military, biotech, coastal scarcity |
| Los Angeles, CA | 3.5% to 4.5% | Massive metro, rent control in parts, extreme prices |
| New York metro | 3% to 4.5% | Dense, regulated, expensive. SFR cap rates are thin. |
| Seattle, WA | 3.5% to 5% | Tech employment, high incomes, expensive housing stock |
What drives the spread between cities
Cap rate differences between cities are not random. Five forces explain most of the spread:
- Population and job growth. Cities adding people faster than housing see prices bid up, compressing cap rates. Austin went from a 6%+ cap market a decade ago to 4% to 5% today.
- Affordability and rent-to-price ratio. Markets where homes are cheap relative to rent (Memphis, Cleveland) naturally produce higher cap rates.
- Property taxes. Texas cities carry higher property taxes (2%+ of value) than Tennessee or Indiana, which eats into NOI and can depress cap rates relative to gross rent.
- Insurance costs. Florida and Gulf Coast markets face sharply higher insurance premiums, especially post-2022 reinsurance repricing. A $4,000 annual premium versus $1,200 is a real NOI hit.
- Perceived risk. Higher-risk markets (economic concentration, declining population, older housing) price at higher cap rates to compensate. The yield is the risk premium.
The Treasury spread: putting cap rates in context
Cap rates do not exist in a vacuum. Experienced investors benchmark them against the 10-year US Treasury yield. The difference is your risk premium: what the market is paying you above a risk-free alternative for the work, risk, and illiquidity of owning a rental.
With the 10-year Treasury near 4.5% in mid-2026, a 7% cap rate offers a 250 basis point spread, which is historically normal. A 4.5% cap rate offers almost zero spread, meaning you are accepting no premium for the extra risk and work. That can be rational in a high-growth market, but you should know you are making that bet.
How to use this data
- Calibrate your expectations. Before analyzing a deal, know the local range. A 6% cap in Tampa is strong; a 6% cap in Cleveland is below average. If you need a refresher on the math, see how to calculate cap rate.
- Compare within tier. Comparing Memphis to San Diego is apples to oranges. Compare Memphis to Indianapolis, or Austin to Nashville.
- Watch the outliers. If a deal is significantly above the local range, ask why. It is either a genuine bargain or a problem you have not found yet.
- Layer in your strategy. Cash-flow investors should focus on Tier 1 and 2 markets. Appreciation investors can accept Tier 3 and 4 if the growth thesis is solid.
Frequently asked questions
What city has the highest cap rates for rentals?
Cleveland, Detroit, Memphis, and Birmingham consistently offer the highest single-family cap rates, typically 7% to 10%+. These are markets with affordable prices and decent rental demand, though they carry more operational risk than lower-cap cities.
Why are cap rates so low in coastal cities?
Because prices are extremely high relative to rents. Buyers in San Diego, LA, or Seattle accept thin yields because they expect long-term appreciation, and scarcity of land limits new supply. The low cap rate reflects confidence in future value, not poor fundamentals.
Are higher cap rate cities better investments?
Not necessarily. Higher cap rates mean higher current yield, but they also typically mean lower appreciation potential and sometimes higher risk. A well-chosen 5% cap property in a growing city can outperform a 9% cap property in a stagnant one on total return. It depends on your strategy.
How often do cap rates change?
Cap rates shift gradually with interest rates, local supply and demand, and economic conditions. They tend to compress (fall) during low-rate periods and expand (rise) when rates climb. A major shift can take 12 to 24 months to fully play out.
Do property taxes affect cap rates?
Yes, significantly. High property taxes (common in Texas and New Jersey, for example) reduce NOI, which can lower the effective cap rate even when the gross rent-to-price ratio looks attractive. Always calculate NOI with the real tax bill.
Should I invest in a low cap rate market?
Only if your strategy is appreciation-focused and you have the reserves to cover thin or negative cash flow. Low cap rate markets (Austin, Denver, San Diego) reward patient investors when growth materializes, but they punish overleveraged ones when it stalls.
What cap rate spread over Treasuries is considered safe?
Historically, a 200 to 400 basis point spread above the 10-year Treasury is considered fair compensation. Below 200 basis points, you are accepting very little premium for real estate's extra risk, work, and illiquidity compared to a government bond.