Rental Property ROI Calculator

A "good" cap rate varies by market and property type, but here are general guidelines:

CAP RATE RANGES:
• 8-12%: Excellent (high cash flow, often C-class areas or high management)
• 6-8%: Good (solid returns with moderate risk)
• 4-6%: Fair (appreciation markets, lower cash flow but safer)
• Below 4%: Poor for cash flow (unless banking on appreciation)

BY PROPERTY TYPE:
• Single-family homes: 6-8%
• Small multifamily (2-4 units): 7-10%
• Large multifamily (5+ units): 6-9%
• Commercial: 7-10%

BY MARKET:
• High-growth cities (Austin, Nashville): 4-6%
• Stable markets (many suburbs): 6-8%
• Cash flow markets (Midwest, rust belt): 8-12%

IMPORTANT: Higher cap rate = higher returns BUT also higher risk (worse areas, more vacancies, higher turnover).

The "1% Rule": Monthly rent should be at least 1% of purchase price.
• $200K property → should rent for $2,000/month minimum
• If rent is $1,500 ($200K × 0.75%) → likely poor investment

Bottom line: Target at least 6% cap rate for decent cash flow. Compare to your local market averages. Don't chase ultra-high cap rates without understanding the risks.