With the real estate industry managing to bounce back during the past decade, it stands as one of the best ways to secure your financial future. It’s also probably the quickest and safest way to build your wealth. Learn about the cap rate by city to find the most profitable location for your next real estate investment.

However, investing in real estate is not that straightforward. There are a number of pitfalls you should be aware of. It can be daunting, especially if you’re not sure how to invest in real estate (first-time investors). The pitfalls along the way can turn your dreams of independence and wealth into a torment that brings about poor returns, bad debt, and lost opportunities along the way.

To avoid potential real estate difficulties and “mousetraps” and save yourself from the quicksand of debt, it’s important to stay informed. Here, we will explain how knowing the real estate cap rate by city, as well as by state and by county, can help you compare your options and ensure that you’re making the most informed and logical decision.

Table of Contents

  1. Why Capitalization Rate Is Important
  2. 2022 Cap Rates by City: Where to Invest in Traditional (Long-Term) Rentals
  3. 2022 Cap Rates by City: Where to Invest in Airbnb Rentals
  4. Using Mashvisor Data to Find the Right Investment Opportunities
  5. Conclusion

Why Capitalization Rate Is Important

Investing in both traditional and Airbnb (long-term and short-term) rentals is a solid start for building wealth in real estate. From consistent cash flows to year-round income, real estate can yield more frequent and higher returns than bonds or stocks.

To make the best-informed decisions, you will need to know what traditional and Airbnb cap rates by city to expect in 2022.

Why Pay Attention to Cap Rate?

What is cap rate? It is the main metric real estate investors use to forecast the ROI from their property. The metric helps real estate investors find areas with the most profitable income properties. It is easy to use, and it allows you to compare the investment potential of different locations.

You can calculate it using the cap rate formula below :

Cap Rate = Net Operating Income (NOI) / Property Value

In other words, it’s the ratio between the net operating income produced by a property and its current value or the original capital cost. Kindly note the cap rate formula doesn’t include the method of financing.

Are you actually going to achieve your return on investment forecasts? Are the operating costs making your investment unprofitable? You can find out by calculating the cap rate by city.

Related: Learn How to Calculate Cap Rate for a Rental Property

How Can Mashvisor Help?

Mashvisor can provide detailed data on every cap rate by city across the US real estate markets. We can help you out on your search for the most profitable investment property in 2022 by showing you the cap rate by city for both traditional and Airbnb rentals.

Besides cap rates, our platform provides other crucial information such as median property prices, average rental income for traditional and Airbnb rentals, price to rent ratios, and more. You can find city-average cap rates for single-family and multi-family homes, townhouses, apartments, condos, and even foreclosures.

So, let’s dive into our comprehensive data to help you make the best possible real estate investment decision in 2022.

2022 Cap Rates by City: Where to Invest in Traditional (Long-Term) Rentals

Mashvisor obtains its comprehensive data from several channels, and then it exports it back in order to verify its accuracy by comparing it to other sources. Some of their most important sources include Airbnb, Zillow, Realtor.com, Roofstock, Auction.com, MLS database, etc.

In this article, we have organized a portion of Mashvisor’s data (for traditional and Airbnb rentals) into segmented tables to make it easier for you to sift through and analyze it. Let’s begin with the US real estate markets with impressive traditional cap rates, arranged from highest to lowest:

Traditional Cap Rates by City in 2021 (All Property Types)

Rank State City Traditional Cap Rate (%) Traditional Rental Income Median Property Price Price-to-Rent Ratio
1 MS Greenwood 10.18 $985 $307,690 26
2 NC Spruce Pine 9.98 $4,451 $448,018 8
3 FL Suwannee 9.97 $1,373 $350,938 21
4 TX Presidio 9.79 $1,365 $240,000 15
5 PA Saxonburg 9.67 $720 $62,344 7
6 CA Alturas 9.14 $3,152 $271,954 7
7 AL Sylacauga 8.98 $1,414 $319,975 19
8 NH Waterville Valley 8.70 $9,810 $869,900 7
9 VA Hillsville 8.35 $1,150 $328,600 24
10 MN Hibbing 8.17 $1,314 $135,100 9
11 OH Gallipolis 8.17 $1,459 $166,638 10
12 AL Logan 8.15 $1,579 $170,750 9
13 IN Clinton 8.06 $812 $78,520 8
14 NM Espanola 8.05 $1,400 $354,700 21
15 IL Rantoul 7.93 $1,007 $93,614 8
16 OK Anadarko 7.91 $903 $91,888 8
17 NY Potsdam 7.88 $4,481 $332,000 6
18 NJ Camden 7.86 $1,321 $154,375 10
19 CA Boron 7.84 $1,670 $178,222 9
20 NM Hobbs 7.82 $1,900 $205,385 9
21 MI Inkster 7.76 $1,100 $100,591 8
22 MN Redwood Falls 7.76 $957 $104,517 9
23 TX Zavalla 7.48 $1,250 $321,878 21
24 PA New Ringgold 7.47 $707 $363,730 43
25 PA Chester 7.44 $1,218 $141,939 10
26 TN Atwood 7.40 $837 $89,000 9
27 PA Monessen 7.38 $980 $100,845 9
28 IL Herrin 7.33 $1,190 $134,350 9
29 NJ Whitesboro 7.33 $2,075 $229,767 9
30 IL Harvey 7.23 $1,167 $106,873 8
31 AR Trumann 7.18 $967 $140,900 12
32 OK Lahoma 7.18 $1,087 $125,167 10
33 FL Rotonda West 7.14 $3,594 $445,077 10
34 KY Forest Hills 7.14 $1,451 $172,243 10
35 TX Nocona 7.14 $1,459 $190,317 11
36 OH Eaton 7.13 $2,290 $249,440 9
37 GA Jenkinsburg 7.11 $1,410 $170,920 10
38 MO Advance 7.11 $940 $106,417 9
39 TX Colorado City 7.10 $1,198 $125,200 9
40 OH Jamestown Village 7.05 $2,011 $262,529 11
41 NY Binghamton 7.03 $2,227 $232,369 9
42 LA Gray 6.98 $1,754 $220,975 11
43 WV Saint Albans 6.97 $1,218 $167,350 11
44 CA Thousand Palms 6.94 $1,620 $195,829 10
45 MD Windsor Mill 6.86 $1,736 $208,317 10
46 VT Troy 6.86 $1,578 $255,280 13
47 NJ Gloucester City 6.84 $1,683 $171,623 9
48 GA Centerville 6.81 $1,494 $180,258 10
49 IA Griswold 6.81 $952 $122,080 11
50 NJ Pemberton 6.77 $1,614 $207,086 11

Traditional Rentals Capitalization Rate Data: Summary

Mashvisor’s real estate market analysis shows us that the most profitable cities for investing in traditional rental properties. If we take Whitesboro NJ for example, it offers quite lucrative long-term rental investment opportunities. With its relatively low median property price of $229,767, traditional rental income of $2,075, and a cap rate real estate of 7.33%, investing there would bring you some nice profit. If you’re a beginner real estate investor trying to find out how to invest in real estate for the first time, you should consider such cities as a first-time investment location.

Another factor that will positively affect your rental business in Presidio is its high price to rent ratio of 9. It stands as a signal that rental demand is strong, and it measures whether the real estate market as a whole favors buying or renting. A high price to rent ratio shows that you probably won’t need to put a lot of time and effort into marketing your rental.

Related: What Price to Rent Ratio by City Should Investors Expect in the US Housing Market 2022?

2022 Cap Rates by City: Where to Invest in Airbnb Rentals

Post-pandemic is an excellent period to go after some Airbnb investments, even if it may sound strange at first. Interest rates are still at their lowest, which makes property ownership more attainable. Also, people’s travel habits are different than two years ago as more are willing to travel within the country. A growing number of travelers are choosing to drive to lakeside retreats and mountain towns in search of an excellent and affordable vacation rental.

The demand for properties in mountain towns and rural areas Is increasing, opening the door for Airbnb renters in smaller communities and remote destinations to earn more. Of course, investing in properties in larger cities is still rewarding, especially in the last few months with looser or non-existing pandemic regulations.

Before deciding to buy Airbnb property, you should take a look at the metrics to be sure whether it’s going to be worth your resources, energy, and time. Here are the cap rates of 100 US cities that will help you create a profitable Airbnb investment strategy.

Airbnb Cap Rates by City in 2021 (All Property Types)

Rank State City Airbnb Cap Rate (%) Monthly Airbnb Rental Income Median Property Price Price to Rent Ratio Airbnb Daily Rate Airbnb Occupancy Rate (%)
1 LA Jennings 9.95 $3,363 $255,081 20 $80 55
2 PA Dunmore 9.74 $2,404 $197,300 14 $162 65
3 NJ Marmora 9.55 $6,408 $468,138 23 $235 64
4 MI Wolverine Lake 9.12 $4,142 $581,367 27 $122 65
5 PA Matamoras 9.11 $5,981 $382,632 25 $879 63
6 MS Horn Lake 9.08 $3,172 $267,744 20 $149 64
7 OH Centerville 9.03 $6,215 $456,032 28 $204 61
8 WI Winneconne 9.03 $2,770 $431,929 39 $391 46
9 PA Monroeville 8.81 $3,290 $123,357 10 $182 63
10 MN Cottage Grove 8.80 $6,545 $515,900 21 $365 72
11 GA Moultrie 8.77 $2,230 $202,963 17 $119 56
12 MN Minnetrista 8.75 $8,410 $486,650 17 $510 49
13 OH Norwalk 8.73 $2,651 $183,267 14 $192 60
14 WI Superior 8.72 $3,317 $235,613 15 $174 63
15 TX Lake Dallas 8.67 $4,852 $337,670 19 $240 73
16 NY German Flatts 8.65 $2,471 $162,800 14 $202 55
17 VA Evington 8.62 $3,240 $247,991 19 $167 59
18 NY Moravia 8.61 $2,522 $177,680 15 $308 41
19 AL Center Point 8.43 $2,148 $166,031 19 $170 56
20 WI Osceola 8.41 $3,606 $284,306 18 $255 54
21 IL Collinsville 8.40 $3,191 $175,570 10 $158 50
22 MI Gibraltar 8.40 $2,777 $220,120 14 $106 85
23 TX Fair Oaks Ranch 8.39 $10,499 $746,734 21 $186 58
24 AR Barling 8.37 $2,450 $206,320 16 $170 46
25 MS Vancleave 8.37 $3,380 $391,150 23 $112 72
26 NC Richlands 8.34 $1,746 $223,422 19 $75 69
27 MS Pearl 8.32 $3,114 $240,846 15 $104 66
28 TN Lakeland 8.32 $3,714 $299,481 15 $181 64
29 MI Eastpointe 8.28 $2,090 $145,661 10 $131 51
30 DE New Castle 8.26 $3,540 $300,515 23 $122 63
31 WV South Charleston 8.25 $2,385 $270,083 21 $104 57
32 PA Berwick 8.24 $2,199 $385,900 43 $105 81
33 VA Pulaski 8.22 $3,176 $205,038 28 $239 57
34 IL Winthrop Harbor 8.19 $4,587 $288,980 17 $183 58
35 VA ARODA 8.19 $2,843 $362,980 26 $166 59
36 KY Waco 8.18 $2,864 $225,388 24 $123 65
37 FL Citrus Springs 8.17 $3,522 $291,083 13 $179 65
38 MI Harper Woods 8.17 $2,208 $147,415 16 $138 59
39 PA Meadville 8.17 $1,907 $156,131 13 $156 68
40 PA Lehighton 8.11 $4,213 $239,693 19 $391 66
41 WI Mount Horeb 8.10 $5,384 $435,150 24 $278 63
42 ME Cumberland 8.09 $5,884 $662,800 32 $201 70
43 NC Camden 8.09 $4,953 $446,980 30 $160 64
44 NC Valdese 8.07 $2,861 $294,160 23 $134 62
45 PA Wilkes-Barre 8.07 $2,258 $163,100 13 $118 59
46 IL Alton 8.06 $2,725 $332,757 31 $124 55
47 IN Osceola 8.05 $2,680 $240,920 16 $347 49
48 WV Elkins 8.04 $2,787 $244,067 31 $166 52
49 NY Dunkirk 8.03 $2,676 $189,267 13 $156 59
50 NJ Maywood 8.02 $5,202 $492,000 15 $119 56

Airbnb Rentals Capitalization Rate Data: Summary

According to the data provided by Mashvisor, several cities offer excellent Airbnb investment opportunities. For example, Elkins (WV) is a city worth considering because of its 8.04% cap rate, median property price of $244,067, and $2,787 monthly Airbnb rental income. Its price to rent ratio of 20 means that people would rather choose to rent than to buy property in Elkins, and the 64% Airbnb occupancy rate is there to confirm the fact.

Finding out the average cap rate by city measures the risk of your Airbnb investment. Higher cap rates typically show higher levels of risk. But if we take other factors into consideration (e.g., median property price, occupancy rate, price to ratio, etc.), you can score a more promising Airbnb investment. A higher cap rate real estate is always associated with Airbnb investments that are more “fruitful” in terms of return on investment.

Using Mashvisor Data to Find the Right Investment Opportunities

Location affects the capitalization rate of an investment property. Properties are more costly in population centers than they are in rural markets. In other words, the cap rate in San Francisco will be lower than the cap rate of a vacation rental in a destination only two hours from the city. However, location is never limited only to the real estate market, but includes the particular area within it as well.

To get access to our real estate investment tools, click here to sign up for a 7-day free trial of Mashvisor today, followed by 15% off for life.

Real Estate Heatmap

Neighborhoods within a city can come with different cap rates, which is why it’s not enough to check a specific cap rate by city, but also by neighborhood. Thanks to Mashvisor, you won’t need to spend much time sifting through numbers and comparing hundreds of neighborhood and city real estate data. You can conduct neighborhood analysis by using our real estate heatmap, which reduces the entire job into a few minutes and mouse clicks.

To get the closest approximation to the true real estate cap rate at the neighborhood level (because the tool doesn’t offer it explicitly), you can:

  • Use the cash on cash metric (which is calculated similarly to cap rate, when you don’t take the method of financing into account); and
  • Search for areas with high rental income and low listing prices.

The type of property you rent out also affects the capitalization rate. You can expect a lower cap rate if you are offering a single family home. On the other hand, more rooms mean more potential revenue, which ultimately affects cap rates. You can expect a higher cap rate if you list a multi-family unit (but again, it depends on the market).

Related: What Is a Good Cash on Cash Return?

Cap Rate by City - Mashvisor's Real Estate Heatmap

Mashvisor’s Real Estate Heatmap enables investors to conduct neighborhood analysis in just a few minutes and mouse clicks.

Cap Rate Calculator

Using our cap rate calculator is probably the most accurate way to find the cap rate by city or calculate the cap rate of a specific neighborhood. It is a handy and innovative tool that leverages the power of predictive analytics. The tool uses traditional rental and Airbnb rental data to provide you with a trustworthy estimate of the capitalization rate for any traditional or Airbnb rental property in the US.

In addition to helping you calculate cap rate by city, Mashvisor also works as a multifaceted rental property calculator. It provides other metrics essential to real estate investors, such as:

  • Cash flow
  • One-time startup costs
  • Listing price
  • Recurring monthly expenses
  • Comparable rental income

Conclusion

In the real estate business, we cannot emphasize the importance of accurate real estate data enough. Being able to access powerful real estate analytics and predictive data in no more than 15 minutes is of great help. There’s no need to ask yourself what cap rate means, how to calculate it, and how to find the cap rate by city.

The best place to start your investment search is to know what traditional and Airbnb cap rate by city to await in 2022.

We invite you to schedule a demo and find out more about how Mashvisor can help you in your search for the right traditional and Airbnb investment property. To start looking for and analyzing the best investment properties in your city and neighborhood of choice, click here.




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