Multifamily Cap Rates by Market: Q1 2026 Snapshot

Q1 2026 Multifamily Cap Rate Overview

After two years of cap rate expansion following the 2022-2023 rate hikes, the multifamily market is showing signs of stabilization — but with significant variation by market.

National Average

The national average multifamily cap rate in Q1 2026 is approximately 5.8%, up from the historic lows of 4.2% in late 2021 but stabilizing after peaking near 6.2% in mid-2024.

Cap Rates by Market Tier

Tier 1 (Gateway Markets)

New York City: 4.8% - 5.2%

Los Angeles: 4.5% - 5.0%

San Francisco: 5.0% - 5.5%

Miami: 4.9% - 5.3%

Tier 2 (Growth Markets)

Nashville: 5.2% - 5.7%

Austin: 5.5% - 6.0%

Charlotte: 5.3% - 5.8%

Raleigh-Durham: 5.0% - 5.5%

Denver: 5.4% - 5.9%

Tier 3 (Value Markets)

Indianapolis: 6.5% - 7.2%

Columbus: 6.2% - 6.8%

Kansas City: 6.5% - 7.0%

Memphis: 7.0% - 7.8%

Cleveland: 6.8% - 7.5%

Where the Opportunity Is

The best risk-adjusted returns in Q1 2026 are in Tier 2 and Tier 3 markets where:

Cap rates exceed the cost of debt (positive leverage)

Population growth supports rent increases

New supply is being absorbed

Markets where cap rates are still below the cost of debt (negative leverage) require a strong rent growth thesis to justify the investment.

DSCR Impact

At current rates (7.0-8.5% for multifamily DSCR loans), properties need a minimum cap rate of approximately 6.0% to achieve a 1.0 DSCR at 75% LTV. This means:

Tier 1 markets — Negative leverage. Need value-add or strong rent growth to justify

Tier 2 markets — Breakeven to slightly positive. Viable with modest rent increases

Tier 3 markets — Positive leverage day one. Cash flows immediately

Our Take

We're seeing the most deal flow in Tier 2 and Tier 3 markets. Investors who can identify value-add opportunities in these markets — below-market rents, deferred maintenance, operational inefficiencies — are finding the best risk-adjusted returns in the current environment.