The honest answer: there is no universally good cap rate
A 7% gross yield in Maricopa County (Phoenix) is roughly market. The same 7% in Manhattan would be a once-in-a-generation deal. The same 7% in rural Mississippi would mean you missed something on the risk side. "Good" is a function of three things: the local risk-free return, the operating expense profile of the asset, and what you are trying to do with the property.
Let's break this down using current market data from a handful of representative US counties.
The cap rate framework that actually matters
Most investor education collapses cap rate into a single threshold ("never buy below 8%", "6% is fine in coastal markets"). That's noise. The framework that actually helps:
Sub-5% gross yield — appreciation-driven markets. You are betting on rent growth and price appreciation outpacing the negative monthly cash flow. Examples in this band: most of California (Orange, Alameda, San Diego counties), Manhattan, parts of the Boston metro. Workable for investors with strong income who can carry small losses against capital gains.
5% to 8% gross yield — balanced markets. The pro forma works on paper after expenses, but the margin for error is thin. Property taxes, insurance, and capex reserves are the difference between a deal that pencils and one that bleeds. Examples: Cook County (Chicago), Harris County (Houston), Travis County (Austin), Miami-Dade.
8% to 11% gross yield — cash-flow markets. The math gives you operating runway, but you are likely buying in markets with weaker appreciation, older housing stock, or higher tax burdens. Lackawanna County (Scranton) and large parts of the industrial Midwest sit here. Operator skill matters more than appreciation luck.
11%+ gross yield — something is wrong. Either the rent number is unsustainable, the property class is risky, the area has structural decline, or you are looking at a niche segment with hidden costs. Worth pursuing only if you understand what the market is pricing in.
Gross is not net, and net is what pays your mortgage
The single most expensive mistake new investors make is confusing gross yield with NOI yield. Gross yield is annual rent divided by purchase price. Net cap rate is NOI divided by purchase price. The gap between them is your real operating reality.
A $230,000 property renting for $1,400/month has a 7.3% gross yield. Now subtract:
Gross monthly rent: $1,400. Operating expenses before debt service: $786/month. NOI: $614/month.
That is a net cap rate of 3.2%, not 7.3%. The mortgage payment on a 25% down conventional loan at current rates is roughly $1,150/month. So you are looking at a $536/month operating loss before considering principal paydown, depreciation, and appreciation.
This is why a 7% gross yield in a high-tax market like Texas, Illinois, or Pennsylvania can be a worse cash-flow asset than a 5% gross yield in a low-tax Sun Belt state. Always run the net numbers.
How to calibrate "good" for your market
Four quick checks before you decide if a deal's cap rate is good:
Where to find real cap rate data
The quickest way to benchmark a market is to look at the gross yield on the median home against the median rent for that county. We publish those numbers for 700+ US counties in our market intelligence pages. Pull the median price and median rent, do the simple math, then layer on the tax and insurance reality for that state.
For a specific deal, the investment property calculator will let you put in actual numbers — purchase price, rent, financing terms, operating expenses — and produce both gross and net cap rates with a clean breakdown of where every dollar goes.
The takeaway
Do not let anyone sell you on a single magic cap rate number. The right cap rate depends on whether you are buying for cash flow, appreciation, or value-add — and on the specific tax, insurance, and growth profile of the market you are buying in. The cleanest way to evaluate a deal is to compute both the gross and the net cap rate, compare them to other markets in the same tier, and make the trade-off explicit.
If you want to see how a specific market compares against the others in your investing universe, run the numbers for your target market and underwrite based on data, not rules of thumb.