Overview
A cap rate is a simple way to measure how much a rental property earns each year, compared to its price. It's expressed as a percentage.
In Miami, most rental properties earn between 2% and 8% a year. Condos usually sit at the low end (2%–5%) because of high HOA fees. Single-family homes vary a lot (2%–7%) depending on insurance costs. Multifamily buildings tend to earn the most (5%–8%+).
Want the number for your own property? Use our free cap rate calculator.
What Is a Cap Rate?
A cap rate tells you how much a property earns each year, before you factor in your mortgage. It's the same for a cash buyer and a buyer with a loan — it only looks at the property's income, not how you paid for it.
The formula:
Cap Rate = Net Operating Income ÷ Property Value
A quick example:
- A property earns $30,000 a year after expenses
- It's worth $500,000
- $30,000 ÷ $500,000 = 6% cap rate
That 6% lets you compare this property to any other property — a condo, a house, a duplex — on the same scale, no matter the price.
How to Calculate Your Own Cap Rate
Step 1: Add up your annual income
- Rent
- Parking or storage fees
- Pet fees
- Any other fees you collect
Step 2: Subtract your annual expenses
- Property taxes
- Insurance
- Repairs and maintenance
- Property management fees
- HOA fees (for condos)
- A vacancy allowance (money set aside for months the unit sits empty)
Don't subtract: your mortgage payment, loan interest, or the cost of major renovations. Cap rate is calculated before any of that.
What's left after subtracting expenses is your Net Operating Income (NOI).
Step 3: Divide
NOI ÷ Property Value = your cap rate. Skip the math and use our cap rate calculator instead.
Why Cap Rate Is Useful
- It lets you compare properties fast, no matter the price
- It shows you what a property should be worth, based on its income
- It's a quick read on risk
The rule of thumb: a lower cap rate usually means a safer property in high demand. A higher cap rate usually means more return, but more risk too.
What Counts as a Good Cap Rate?
There's no single "good" number — it depends on how much risk you're comfortable with.
- 4%–5%: safer, in-demand markets
- 5%–7%: a solid, balanced return
- 7%–9%+: higher return, but higher risk
A low cap rate isn't a bad sign. It usually just means the property is in a market people really want to be in.
Cap Rate by Property Type
Condos: typically 3%–6%
Condos usually earn the least, because of:
- HOA fees, which come straight out of your income
- Higher purchase prices per square foot
- Rental restrictions some buildings put in place
In Florida, new safety and reserve-funding laws passed after high-profile building failures have pushed HOA fees up further, squeezing this range even more in older buildings.
Single-family homes: typically 4%–7%
No HOA fee means more of the rent reaches you. But you're on the hook for every repair, and insurance is often the biggest expense — especially in coastal markets.
Multifamily properties: typically 5%–8%+
Multiple units mean multiple income streams, which spreads out your risk. If one unit sits empty, the others keep paying the bills.
Miami Cap Rates by Neighborhood
Miami isn't one market — it's a dozen small ones, each with its own price point and rental demand. Here's how they typically compare:
| Neighborhood | Property Type | Typical Cap Rate | What Drives It |
|---|---|---|---|
| Brickell | Condo | 3%–4.5% | High prices and HOA fees, but strong, steady rental demand from professionals |
| Edgewater | Condo | 4%–5% | Cheaper entry point than Brickell, with similar bay-front appeal |
| Downtown Miami | Condo | 3.5%–5% | Mix of new luxury towers and older, cheaper buildings |
| Wynwood | Condo | 3%–5% | More of an appreciation play right now than a cash-flow one |
| Coral Gables | Single-family | 2%–3.5% | High prices buy prestige and stability, not yield |
| Coconut Grove | Single-family | 2%–3.5% | Similar story to Coral Gables — a wealth-preservation market |
| Little Havana | Single-family / small multifamily | 5%–7% | Lower prices mean stronger cash flow, but check the property's condition closely |
| Doral, Kendall, Hialeah | Single-family | 5%–7.5% | Miami's best cash-flow suburbs — lower prices, still solid rental demand |
The pattern is simple: the closer you get to the water and the more prestige a neighborhood carries, the lower the cap rate. Investors accept that trade-off for stability and appreciation. If cash flow is your priority, the suburbs usually win.
Condo vs. Single-Family Home in Miami
Here's how a typical Miami condo stacks up against a typical Miami single-family home.
The basics
| Condo | Single-Family Home | |
|---|---|---|
| Typical size | ~900 sq ft | ~1,570 sq ft |
| Median price | $400,000 | $685,000 |
| Average monthly rent | $3,150 | $3,400 |
The full math
| Annual numbers | Condo | Single-Family Home |
|---|---|---|
| Rent collected | $37,800 | $40,800 |
| HOA fee | −$12,600 | $0 |
| Property tax | −$7,600 | −$13,000 |
| Insurance | −$1,200 | −$6,500 |
| Property management (8%) | −$3,020 | −$3,260 |
| Vacancy allowance (5%) | −$1,890 | −$2,040 |
| Maintenance/repairs | −$1,130 | −$3,260 |
| Net Operating Income | $10,360 | $12,740 |
| Cap Rate | 2.6% | 1.9% |
The condo actually comes out slightly ahead here — the opposite of what happens in most U.S. cities. Why? Miami property insurance is expensive, and a single-family owner pays the full bill alone. A condo owner splits that cost with every other unit in the building through the HOA. The HOA fee still hurts the condo's return, but Miami's insurance costs hurt the house's return even more.
Sources: median prices from MIAMI Association of Realtors closed-sale data (July 2026); condo rent from Zumper (2-bedroom, July 2026); single-family rent from the Miami-Dade rental market report cited by MIAMI REALTORS; HOA fee reflects the 2026 Miami-Dade average for non-high-rise buildings; property tax uses Miami-Dade's non-homesteaded rate (~1.9%), since rental properties don't qualify for the homestead exemption; insurance costs reflect Miami-Dade's elevated windstorm and flood exposure. Your actual numbers will vary by building, flood zone, and insurer.
Want to test this against a property you're looking at? Use our cap rate calculator for an instant answer.
How Miami Compares to Other Cities
| City | Typical Cap Rate |
|---|---|
| New York City | 3.5%–5% |
| San Francisco | 3.5%–5% |
| Los Angeles | 4%–5% |
| Washington, DC | 4%–5% |
| Miami | 2%–8%, depending on property type and neighborhood |
| Secondary markets (nationally) | 6%–9%+ |
Big, in-demand cities tend to have lower, steadier cap rates — prices are bid up by strong buyer demand. Smaller markets usually offer higher cap rates, with more risk attached.
How Allioo Helps You Evaluate a Property
- Landlords see cap rate insights right in their dashboard when reviewing lease offers
- Our free cap rate calculator gives you an instant number for any property
Deciding whether to keep or sell a property? Our guide on calculating true ownership costs over time is a good next read. You can also check live prices and rent trends on our Miami-Dade market stats page.
What Cap Rate Doesn't Tell You
Cap rate is a great starting point, but it doesn't account for:
- How you're financing the property
- Tax benefits of ownership
- Future rent growth
- How much the property might appreciate
- Money you put into renovations
Use it alongside cash flow, ROI, and where the market is headed — not as the only number that matters.
