What is a cap rate in real estate?

The capitalization rate is a property’s annual net operating income (rent minus operating expenses like taxes, insurance, maintenance, and management, but before mortgage payments) divided by its purchase price. A $200,000 house producing $14,000 of net operating income has a 7% cap rate.

What is a good cap rate in 2026?

It depends on the market. In mid-2026, typical single-family cap rates run roughly 3-4.5% in coastal California, 5-6.5% in fast-growing Sun Belt metros, and 6.5-10% in Midwest and Southern cash-flow markets. A "good" cap rate is one that beats your financing cost and compensates for the market’s risk, not simply the highest number available.

Why are cap rates so much higher in the Midwest?

Home prices in metros like Cleveland, Detroit, and Toledo are low relative to the rents those homes command, which mechanically produces high yields. The trade-off is slower long-run price appreciation, older housing stock with higher maintenance needs, and in some markets flat or declining population.

Is a higher cap rate always better?

No. Cap rate is a yield, and like bond yields, higher usually means the market is pricing in more risk: weaker appreciation, higher vacancy, tougher tenant pools, or heavier capital expenditure. Many successful investors deliberately accept 5-6% in a growth market instead of 9% in a declining one.

Do these cap rates account for property taxes and insurance?

Yes, in principle: cap rates are based on net operating income, which subtracts taxes and insurance. That is exactly why Texas and Florida metros show lower cap-rate ranges than their gross rent yields suggest, and why high-tax Illinois and Ohio counties compress otherwise strong Midwest yields.

How has insurance inflation changed cap rates in Florida, Texas, and Louisiana?

Premiums in coastal Florida and Louisiana have roughly doubled since 2020, and Texas Gulf Coast premiums have risen sharply too. Every extra $1,500 of annual premium on a $250,000 house cuts the cap rate by about 0.6 percentage points, which is why Gulf metros deserve an explicit insurance haircut before comparing them to inland markets.

Where does this cap-rate data come from?

The ranges are editorial estimates as of mid-2026, triangulated from Zillow home-value and rent data (June 2026 report), published single-family-rental market surveys, and typical metro-level operating-cost assumptions. Individual neighborhoods and properties routinely fall outside these ranges.

Can I invest in high cap-rate cities without buying a whole house?

Yes. Fractional platforms like Lofty let you buy shares of individual rental properties in many of these metros starting at $50, with property-level financials disclosed so you can check the cap rate yourself before investing.

Cap Rates by City (2026): Where Rental Yields Are Highest

Data last reviewed: July 2026

Cap rates, annual net operating income divided by purchase price, are the fastest way to compare rental yields across cities. In mid-2026 the spread between the highest- and lowest-yield major metros is wider than at any point in the past decade: Midwest cash-flow markets like Toledo and Detroit pencil at 8-10%, while San Jose and San Francisco sit near 3-4%. This page ranks 54 major US metros by their typical single-family cap-rate range, approximate as of mid-2026, and explains what drives the gap.

Quick answer: the highest typical single-family cap rates in 2026 are in Toledo (8-10%), Detroit (8-10%), Akron (7.5-9.5%), and Cleveland (7.5-9%). The lowest are in San Jose (3-4%), San Francisco (3-4.5%), and Los Angeles (3.5-5%). The national typical home value is $372,057 and the national typical asking rent is $1,965/month (Zillow, June 2026).

Cap rates by city, highest to lowest (2026)

Ranges reflect typical single-family rentals in decent condition across the metro. Individual neighborhoods run wider in both directions. Home values and rents are Zillow metro figures from June 2026; rows marked * use estimated values for metros outside the Zillow top-50 table.

#	Metro	Region	Typical SFR cap-rate range	Typical home value	Typical rent
1	Detroit, MI	Midwest	8%–10%	$270,689	$1,518/mo
2	Toledo, OH	Midwest	8%–10%	$204,000	$1,302/mo
3	Akron, OH	Midwest	7.5%–9.5%	$241,000	$1,320/mo
4	Cleveland, OH	Midwest	7.5%–9%	$254,986	$1,474/mo
5	Birmingham, AL	South	7%–8.5%	$263,437	$1,462/mo
6	Buffalo, NY	Northeast	7%–8.5%	$294,112	$1,461/mo
7	Little Rock, AR	South	7%–8.5%	$218,000	$1,250/mo
8	Memphis, TN	South	7%–8.5%	$246,954	$1,435/mo
9	Pittsburgh, PA	Northeast	7%–8.5%	$234,727	$1,523/mo
10	Rochester, NY	Northeast	7%–8.5%	$250,000	$1,420/mo
11	St. Louis, MO	Midwest	7%–8.5%	$280,017	$1,459/mo
12	Baltimore, MD	South	6.5%–8%	$406,745	$1,936/mo
13	Cincinnati, OH	Midwest	6.5%–8%	$312,453	$1,583/mo
14	Indianapolis, IN	Midwest	6.5%–8%	$296,207	$1,558/mo
15	Kansas City, MO	Midwest	6.5%–8%	$331,552	$1,545/mo
16	Louisville, KY	South	6.5%–8%	$283,500	$1,385/mo
17	Milwaukee, WI	Midwest	6.5%–8%	$393,554	$1,552/mo
18	Oklahoma City, OK	South	6.5%–8%	$247,292	$1,393/mo
19	Tulsa, OK	South	6.5%–8%	$220,000	$1,300/mo
20	Chicago, IL	Midwest	6%–7.5%	$359,897	$2,275/mo
21	Columbus, OH	Midwest	6%–7.5%	$334,559	$1,528/mo
22	Huntsville, AL	South	6%–7.5%	$330,000	$1,550/mo
23	New Orleans, LA	South	6%–7.5%	$264,193	$1,617/mo
24	Philadelphia, PA	Northeast	6%–7.5%	$394,620	$1,928/mo
25	Houston, TX	South	5.5%–7%	$307,273	$1,648/mo
26	San Antonio, TX	South	5.5%–7%	$278,941	$1,416/mo
27	Atlanta, GA	South	5.5%–6.5%	$381,729	$1,854/mo
28	Jacksonville, FL	South	5.5%–6.5%	$352,624	$1,708/mo
29	Richmond, VA	South	5.5%–6.5%	$399,039	$1,772/mo
30	Virginia Beach, VA	South	5.5%–6.5%	$376,903	$1,878/mo
31	Charlotte, NC	South	5%–6.5%	$389,125	$1,750/mo
32	Dallas-Fort Worth, TX	South	5%–6.5%	$365,048	$1,673/mo
33	Minneapolis-St. Paul, MN	Midwest	5%–6.5%	$394,234	$1,727/mo
34	Orlando, FL	South	5%–6.5%	$385,766	$1,972/mo
35	Tampa, FL	South	5%–6.5%	$359,973	$2,020/mo
36	Las Vegas, NV	West	5%–6%	$427,825	$1,748/mo
37	Nashville, TN	South	5%–6%	$456,355	$1,810/mo
38	Phoenix, AZ	West	5%–6%	$445,343	$1,733/mo
39	Raleigh, NC	South	5%–6%	$436,249	$1,689/mo
40	Miami, FL	South	4.5%–6%	$476,638	$2,695/mo
41	Austin, TX	South	4.5%–5.5%	$424,110	$1,653/mo
42	Denver, CO	West	4.5%–5.5%	$571,808	$1,930/mo
43	Portland, OR	West	4.5%–5.5%	$551,911	$1,805/mo
44	Riverside, CA	West	4.5%–5.5%	$584,574	$2,539/mo
45	Sacramento, CA	West	4.5%–5.5%	$582,799	$2,308/mo
46	Salt Lake City, UT	West	4.5%–5.5%	$566,343	$1,638/mo
47	Washington, DC	South	4.5%–5.5%	$584,571	$2,448/mo
48	Boston, MA	Northeast	4%–5.5%	$744,972	$3,210/mo
49	Seattle, WA	West	4%–5.5%	$742,220	$2,269/mo
50	San Diego, CA	West	4%–5%	$940,304	$2,991/mo
51	Los Angeles, CA	West	3.5%–5%	$965,867	$2,927/mo
52	New York, NY	Northeast	3.5%–5%	$736,042	$3,573/mo
53	San Francisco, CA	West	3%–4.5%	$1,144,062	$3,301/mo
54	San Jose, CA	West	3%–4%	$1,579,943	$3,729/mo

What drives the cap-rate spread

Three variables explain most of the difference between a 3.5% metro and a 9% metro.

1. Price-to-rent ratios

Cap rate is mostly the inverse of the price-to-rent ratio. San Jose homes cost about 35 years of rent; Cleveland homes cost about 14. Nothing about operating a rental changes that gap, it is set by what local buyers will pay for housing. Our companion page on price-to-rent ratios by city shows the same 54 metros through that lens.

2. Property taxes

Taxes are usually the largest single operating expense. Illinois (~1.9% effective) and Ohio (~1.4%) claw back a meaningful slice of their headline yields, while Alabama (~0.4%) and Tennessee (~0.5%) let owners keep more of the gross. See the full table on our property tax rates by state page, and note that several states assess investor-owned property at higher ratios than owner-occupied homes.

3. Insurance, the 2026 wildcard

Insurance inflation has become the biggest underwriting surprise in Gulf and coastal markets. Premiums in parts of Florida and Louisiana have roughly doubled since 2020, and Texas coastal premiums are up sharply as well. A $1,500/year premium increase on a $250,000 house shaves about 0.6 percentage points off the cap rate. Miami, Tampa, Orlando, Jacksonville, Houston, and New Orleans all deserve an explicit insurance haircut before you compare their ranges to inland metros. Get a real quote per property; county averages are not enough in these markets.

How to use cap rate (and when not to)

Cap rate is a screening tool, not a verdict. Use it to compare markets and to sanity-check asking prices: if a seller’s pro-forma implies a 9% cap rate in a metro that typically trades at 6.5%, either you found a deal or (more often) the expense assumptions are fantasy. Cap rate ignores financing, so pair it with your loan terms: when your mortgage rate exceeds the cap rate, leverage reduces your cash flow rather than amplifying it (negative leverage). You can run these numbers on any property with our free cap rate calculator and the fuller rental property calculator.

Regional analysis

Midwest: the cash-flow belt

The Midwest owns the top of the table. Low acquisition prices against sturdy rents produce 6-10% typical ranges, and rents grew 2-5% across most of these metros over the past year. The offsets: high property taxes in Ohio and Illinois, older housing stock that demands real capital-expenditure budgets, and flat population in several metros. Columbus, Indianapolis, and Kansas City stand out for pairing solid yields with genuine growth.

Midwest metros covered here: Detroit, MI (8%–10%), Toledo, OH (8%–10%), Akron, OH (7.5%–9.5%), Cleveland, OH (7.5%–9%), St. Louis, MO (7%–8.5%), Cincinnati, OH (6.5%–8%), Indianapolis, IN (6.5%–8%), Kansas City, MO (6.5%–8%), Milwaukee, WI (6.5%–8%), Chicago, IL (6%–7.5%), Columbus, OH (6%–7.5%), Minneapolis-St. Paul, MN (5%–6.5%).

South: growth with rising cost drag

The South splits in two. Inland value markets, Memphis, Birmingham, Oklahoma City, Little Rock, and Louisville, behave like the Midwest with 6.5-8.5% ranges and low taxes. The Gulf and Atlantic growth metros trade lower (4.5-6.5%) and carry the insurance problem: Florida and Louisiana premiums are the fastest-growing operating expense in the country. Texas adds a ~1.4% effective property tax to the bill.

South metros covered here: Birmingham, AL (7%–8.5%), Little Rock, AR (7%–8.5%), Memphis, TN (7%–8.5%), Baltimore, MD (6.5%–8%), Louisville, KY (6.5%–8%), Oklahoma City, OK (6.5%–8%), Tulsa, OK (6.5%–8%), Huntsville, AL (6%–7.5%), New Orleans, LA (6%–7.5%), Houston, TX (5.5%–7%), San Antonio, TX (5.5%–7%), Atlanta, GA (5.5%–6.5%), Jacksonville, FL (5.5%–6.5%), Richmond, VA (5.5%–6.5%), Virginia Beach, VA (5.5%–6.5%), Charlotte, NC (5%–6.5%), Dallas-Fort Worth, TX (5%–6.5%), Orlando, FL (5%–6.5%), Tampa, FL (5%–6.5%), Nashville, TN (5%–6%), Raleigh, NC (5%–6%), Miami, FL (4.5%–6%), Austin, TX (4.5%–5.5%), Washington, DC (4.5%–5.5%).

Northeast: two different markets

Legacy upstate and rust-belt metros, Buffalo, Rochester, Pittsburgh, offer 7-8.5% ranges on very low entry prices with newly resilient rents. The coastal corridor, Boston, New York, is a 3.5-5.5% appreciation market where taxes and regulation demand careful underwriting.

Northeast metros covered here: Buffalo, NY (7%–8.5%), Pittsburgh, PA (7%–8.5%), Rochester, NY (7%–8.5%), Philadelphia, PA (6%–7.5%), Boston, MA (4%–5.5%), New York, NY (3.5%–5%).

West: paying for appreciation

Almost everything west of Denver trades at 3-5.5%. Investors here are buying supply constraints and long-run appreciation, not current income. San Francisco and San Jose rents rebounded strongly in 2026 (+8.2% and +6.2% YoY), but from a base so expensive that yields remain the lowest in the nation. Phoenix and Las Vegas sit in the middle, with the Sun Belt supply wave keeping rents flat.

West metros covered here: Las Vegas, NV (5%–6%), Phoenix, AZ (5%–6%), Denver, CO (4.5%–5.5%), Portland, OR (4.5%–5.5%), Riverside, CA (4.5%–5.5%), Sacramento, CA (4.5%–5.5%), Salt Lake City, UT (4.5%–5.5%), Seattle, WA (4%–5.5%), San Diego, CA (4%–5%), Los Angeles, CA (3.5%–5%), San Francisco, CA (3%–4.5%), San Jose, CA (3%–4%).

Where investors go from here

If yield is the goal, the practical shortlist is the Midwest plus inland South, checked against taxes and property condition. If growth is the goal, the Carolinas, Tennessee, and Texas offer the best blend, see our ranked best cities for real estate investing in 2026. And if you want exposure to these markets without buying whole houses, the Lofty marketplace lists fractional shares of rental properties in many of them, with per-property financials you can check against this table. Rent levels for the same metros are on our average rent by city page.

Frequently asked questions

What is a cap rate in real estate?: The capitalization rate is a property’s annual net operating income (rent minus operating expenses like taxes, insurance, maintenance, and management, but before mortgage payments) divided by its purchase price. A $200,000 house producing $14,000 of net operating income has a 7% cap rate.
What is a good cap rate in 2026?: It depends on the market. In mid-2026, typical single-family cap rates run roughly 3-4.5% in coastal California, 5-6.5% in fast-growing Sun Belt metros, and 6.5-10% in Midwest and Southern cash-flow markets. A "good" cap rate is one that beats your financing cost and compensates for the market’s risk, not simply the highest number available.
Why are cap rates so much higher in the Midwest?: Home prices in metros like Cleveland, Detroit, and Toledo are low relative to the rents those homes command, which mechanically produces high yields. The trade-off is slower long-run price appreciation, older housing stock with higher maintenance needs, and in some markets flat or declining population.
Is a higher cap rate always better?: No. Cap rate is a yield, and like bond yields, higher usually means the market is pricing in more risk: weaker appreciation, higher vacancy, tougher tenant pools, or heavier capital expenditure. Many successful investors deliberately accept 5-6% in a growth market instead of 9% in a declining one.
Do these cap rates account for property taxes and insurance?: Yes, in principle: cap rates are based on net operating income, which subtracts taxes and insurance. That is exactly why Texas and Florida metros show lower cap-rate ranges than their gross rent yields suggest, and why high-tax Illinois and Ohio counties compress otherwise strong Midwest yields.
How has insurance inflation changed cap rates in Florida, Texas, and Louisiana?: Premiums in coastal Florida and Louisiana have roughly doubled since 2020, and Texas Gulf Coast premiums have risen sharply too. Every extra $1,500 of annual premium on a $250,000 house cuts the cap rate by about 0.6 percentage points, which is why Gulf metros deserve an explicit insurance haircut before comparing them to inland markets.
Where does this cap-rate data come from?: The ranges are editorial estimates as of mid-2026, triangulated from Zillow home-value and rent data (June 2026 report), published single-family-rental market surveys, and typical metro-level operating-cost assumptions. Individual neighborhoods and properties routinely fall outside these ranges.
Can I invest in high cap-rate cities without buying a whole house?: Yes. Fractional platforms like Lofty let you buy shares of individual rental properties in many of these metros starting at $50, with property-level financials disclosed so you can check the cap rate yourself before investing.

Methodology & sources

Cap-rate ranges are editorial estimates for typical single-family rentals, approximate as of mid-2026. They were triangulated from Zillow June 2026 metro home values and asking rents, published 2025-2026 single-family-rental market surveys, and typical metro operating-cost assumptions (taxes, insurance, maintenance, management, vacancy). Home values are Zillow Home Value Index (ZHVI) levels; rents are Zillow Observed Rent Index (ZORI) levels, both June 2026 except rows marked as estimated. Data last reviewed: July 2026.

Zillow Research — Zillow Home Value Index (ZHVI) and Zillow Observed Rent Index (ZORI), metro-level typical home values and asking rents.
Tax Foundation — Effective property tax rates on owner-occupied housing by state (2026 table, 2024 American Community Survey data).
U.S. Census Bureau — American Community Survey data on household incomes, housing values, and property taxes paid.
FRED, Federal Reserve Bank of St. Louis — Historical series for home prices, rents, and mortgage rates used to sanity-check levels and trends.

All figures on this page are approximate estimates compiled for research and education, as of mid-2026. They are not investment advice, an offer to sell securities, or a substitute for your own underwriting. Metro-level averages hide wide neighborhood-level variation; always verify current local data before making decisions.