Cap rates vary significantly by property type. Understanding typical cap rate ranges for different asset classes helps investors set realistic expectations and identify opportunities.

Multifamily Properties

Apartment buildings and multifamily properties typically have cap rates in the 4-8% range. These properties are considered lower risk due to diversified income streams from multiple tenants. Class A properties in prime locations often trade at lower cap rates (4-5%), while Class B and C properties offer higher returns (6-8%).

Commercial Real Estate

Office buildings, retail spaces, and industrial properties have wider cap rate ranges. Office properties range from 6-10%, retail from 5-9%, and industrial from 5-8%. Location and tenant credit quality heavily influence these rates.

Residential Rental Properties

Single-family homes and small residential properties typically have cap rates between 4-12%. Markets with strong job growth and population increases tend toward the lower end, while smaller markets offer higher potential returns.