What is considered a good cap rate for rental properties in 2024?

real estateinvestingrental property

Oleg_K

Joined:
07.08.2023
Posts: 2206

Topic Starter

02.01.2025 06:11

I'm currently looking into buying my first rental property and I'm trying to figure out how to evaluate the deals I'm seeing online. Everyone seems to throw around different numbers, but I'm struggling to pin down what actually constitutes a 'good' capitalization rate in the current market environment. Is a 6% cap rate considered decent, or should I be holding out for something closer to 8% or 10%? I know it depends heavily on the location and asset class, but I'd love to hear some general benchmarks or rules of thumb you all use when analyzing potential investments.

15 replies in this topic

Vic_S

Joined:
26.02.2022
Posts: 939

06.01.2025 22:04

Honestly, in 2024, anything above 6% in a decent market is getting harder to find. If you see an 8% cap rate, you really need to look at the neighborhood and the condition of the property.

Alan_K

Joined:
18.07.2023
Posts: 749

20.01.2025 15:31

In reply to a previous post

I agree with the first comment. A 10% cap rate in this day and age usually implies there's something seriously wrong with the property or the area.

Vic_S

Joined:
07.09.2020
Posts: 1805

19.03.2025 12:09

It really depends on your goals. Are you looking for cash flow or appreciation? High cap rates usually mean low appreciation potential.

Alan_K

Joined:
02.02.2025
Posts: 1930

14.04.2025 03:54

In reply to a previous post

Exactly. You can't compare a turnkey property in a tier 1 city to a fixer-upper in the Midwest. They are different assets.

uncle_joe

Joined:
04.03.2020
Posts: 1535

23.04.2025 14:26

I'm currently targeting 7% for my portfolio. Anything less than that doesn't really cover the financing costs with current interest rates.

camilo

Joined:
02.01.2022
Posts: 2226

27.04.2025 10:37

In reply to a previous post

To your point about financing, don't forget to account for your debt service coverage ratio. A 'good' cap rate means nothing if your mortgage payment eats all the cash flow.

MrNobody

Joined:
07.09.2020
Posts: 96

09.06.2025 12:14

I've stopped looking at cap rates and started looking at Cash-on-Cash return. It feels much more relevant to my actual pocketbook.

greg_b

Joined:
02.01.2023
Posts: 1696

25.07.2025 22:21

In reply to a previous post

That's a great approach. Cap rates are more of a institutional metric anyway.

deleted_user

Joined:
26.09.2020
Posts: 594

12.10.2025 04:52

In reply to a previous post

Don't hold your breath for 10% unless you are looking at C-class properties that require a ton of management.

uncle_joe

Joined:
18.08.2024
Posts: 1558

12.10.2025 08:57

Is anyone actually finding 8% deals right now? Everything I see on Zillow is hovering around 4-5%.

IdkButIWrite

Joined:
30.10.2024
Posts: 182

21.10.2025 08:50

In reply to a previous post

You won't find the good deals on the MLS. You need to network with wholesalers if you want those higher cap rates.

Kevin_M

Joined:
03.02.2021
Posts: 921

05.11.2025 02:15

Just remember that interest rates are high right now, so your leverage is more expensive. Your cap rate needs to be significantly higher than your mortgage rate to make sense.