Cap rate (capitalization rate) is net operating income divided by purchase price. It tells you the unleveraged return a property generates. A $300,000 property producing $18,000 NOI has a 6% cap rate. It's the most common metric for comparing rental properties because it strips out financing and gives you an apples-to-apples comparison.

What is a good cap rate for rental property?

For residential rentals, 5-8% is generally considered solid. Above 8% is excellent but often comes with higher risk (rougher neighborhoods, older buildings, declining markets). Below 5% is common in expensive metros where investors rely more on appreciation than cash flow.

How is cap rate different from cash-on-cash return?

Cap rate ignores financing — it measures the property's return as if you paid all cash. Cash-on-cash return measures your actual return on the cash you invested, factoring in your mortgage. A property with a 6% cap rate could yield a 12% cash-on-cash return with leverage.

What is the 1% rule in real estate?

The 1% rule says monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month. It's a quick screening tool — many successful rentals don't pass the 1% rule, especially in higher-priced markets.

What is the BRRRR strategy?

BRRRR stands for Buy, Rehab, Rent, Refinance, Repeat. You buy a distressed property below market value, renovate it, rent it out, then do a cash-out refinance based on the new appraised value to pull out most or all of your original capital and repeat the process.

Where does CapRateCity get its data?

Our city-level data draws from publicly available sources including U.S. Census Bureau population and income figures, Zillow Home Value Index for median prices, HUD Fair Market Rents, and state/county tax assessor records. Data is updated periodically.

CapRateCity

The Rankings · 50 Curated Lists

Rental Property Rankings

Data-driven city rankings across 50 curated lists plus state-by-state breakdowns — all generated from the 775-city database, updated quarterly.

50 rankings · 50 state hubs · 775 US markets analyzed

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By Returns

8 rankings

01
Highest Cap Rate Cities
The 25 US cities with the highest estimated cap rates for rental property investors. These markets offer the strongest…
02
Best Cash Flow Cities
Top 25 US cities ranked by rent-to-price ratio for maximum monthly cash flow. Find where rental income best covers your mortgage…
03
Highest Rent-to-Price Ratio
The 25 US cities where monthly rent is highest relative to home price. The best markets for the 1% rule and cash flow investing.
04
Best Appreciation Markets
Top 25 US cities with the highest annual home value appreciation rates. Markets where equity growth adds to your total return.
05
Highest NOI Cities
Top 25 US cities ranked by estimated net operating income. Where rental income minus expenses produces the most annual profit.
06
Lowest GRM Cities
The 25 US cities where you pay the fewest years of rent to buy. Low GRM = high income relative to price.
07
Best Cash-on-Cash Returns
Top 25 cities ranked by estimated cash-on-cash return with 20% down at 7% interest. Your actual return on invested capital.
08
Cities Passing 1% Rule
Every US city in our database where median rent exceeds 1% of median home price. The gold standard screening tool.

By Price

10 rankings

By Region

4 rankings

By Strategy

11 rankings

By City Size

3 rankings

By Market Quality

8 rankings

Combo & Niche

6 rankings

Browse by State

51 hubs

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The CapRateCity Report

Weekly market analysis: highest cap rate cities, emerging markets, and deal breakdowns. Free, no spam.