So far this February, the average capitalization rate across the 100 cities in our index was 4.04%, with Detroit having the highest at 14.99% and Jersey City the lowest at 1.85%.
The average property tax rate of all cities was 1.14%.
Nashville had a cap rate of 4.40%.
Top 5 cities with the highest Cap rates.
1. Detroit, Michigan – 14.99%
Detroit had the highest capitalization rate of any city in the U.S at 14.99%. The city commanded rental rates just north of $800 per month, alongside affordable housing at a median of $52,500. This rate came despite above average property taxes at 2.39%.
2. Cleveland, Ohio – 9.83%
Cleveland had the second highest capitalization rate of any city at 9.83%. Relatively high median rents of $831 per month, coupled with home prices at $79,900, made the city a solid investment option.
3. Cincinnati, Ohio – 8.56%
Though Cincinnati real estate prices were more expensive compared with other cities in our top three, rents at $1,450 per month helped drive the city’s desirable 8.56% cap rate.
4. New Orleans, Louisiana – 6.88%
New Orleans placed as the fourth highest capitalization rate at 6.88%. A number of factors contributed to this including favorable property taxes and high median rents at $1,500 per month.
5. Baltimore, Maryland – 6.61%
Baltimore saw capitalization rates increase slightly month over month, due to a dip in home prices to $175,000. Rent prices remained stable at a median of $1,332 per month.
Top 5 cities with the lowest CAP rate.
1. Jersey City, NJ – 1.85%
Jersey City had the lowest capitalization rate of any city this February, displacing last month’s lowest, San Francisco. A handful of factors contributed to low returns, including a rise in home prices to $645,000, as well as higher than average property taxes.
2. San Francisco, CA – 1.95%
Though no longer the lowest cap rate in the country, San Francisco came in a close second at 1.95%. Strong rent prices of $4,150 per month did not outweigh the highest real estate prices of any major city in the U.S. at a median of $1.4 million.
3. Charlotte, NC – 2.09%
Charlotte saw a low 2.09% capitalization rate this February. Strong median rent prices of $1,413 per month were not enough to outweigh the cost of acquiring a home at $409,257.
4. Long Beach, CA – 2.10%
The Long Beach residential investment market saw a low 2.10% capitalization rate this February. Despite strong rent prices at a median of $1,907 per month, the city suffered from expensive home prices at a median of $599,000.
5. San Diego, CA – 2.18%
San Diego rounds out the top five lowest capitalization rates this February at 2.18%, a slight drop from last month’s 2.22%. This change was due to a slight increase in home prices to $695,000.