Is 8 Percent Cap Rate Good

In general, a property with an 8% to 12% cap rate is considered a good cap rate. … In contrast, a lower-demand area like an up-and-coming neighborhood or a rural neighborhood might see average cap rates of 10 percent or higher.

What does a cap rate of 8 mean?

Cap rates are seen as a measure of risk and return, a “low” cap rate of 3-5% would mean the asset is lower risk and higher value; a “higher” cap rate of 8-10% reflects a lower price, higher risk and higher return.

What is a good average cap rate?

For example, professionals purchasing commercial properties might buy at a 4% cap rate in high-demand (and therefore less risky) areas, but hold out for a 10% (or even higher) cap rate in low-demand areas. Generally, 4% to 10% per year is a reasonable range to earn for your investment property.