Question 1

What is a cap rate?

Accepted Answer

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.

Question 2

What is a good cap rate for rental property?

Accepted Answer

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.

Question 3

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

Accepted Answer

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.

Question 4

What is the 1% rule in real estate?

Accepted Answer

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.

Question 5

What is the BRRRR strategy?

Accepted Answer

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.

Question 6

Where does CapRateCity get its data?

Accepted Answer

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.

#	City	Cap Rate	Price	Rent/Mo	1% Rule	Tax	Vacancy	Growth
1	Roanoke Rapids, NC	9.7%	$100K	$990	1.0%	0.78%	5.3%	1.5%
2	Orangeburg, SC	8.6%	$150K	$1,320	0.9%	0.57%	5.5%	1.9%
3	Meridian, MS	8.4%	$120K	$1,070	0.9%	0.66%	7.4%	0.2%
4	Ozark, AL	8.3%	$155K	$1,310	0.8%	0.42%	6.4%	0.8%
5	Kingsville, TX	8.2%	$150K	$1,420	0.9%	1.72%	5.8%	1.8%
6	Enterprise, AL	7.9%	$175K	$1,420	0.8%	0.42%	6.4%	0.8%
7	Vidalia, GA	7.8%	$165K	$1,400	0.8%	0.93%	6.2%	0.9%
8	Decatur, IL	7.7%	$120K	$1,120	0.9%	2.06%	5.9%	0.2%
9	Lumberton, NC	7.6%	$130K	$1,050	0.8%	0.78%	5.3%	1.5%
10	McComb, MS	7.4%	$105K	$840	0.8%	0.66%	7.4%	0.2%

Cap rates for every
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Highest Cap Rate Cities

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How to Evaluate a Rental Property

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