What is a good cap rate for a Rhode Island rental?

A cap rate is the property's net operating income divided by its price, and it tells you the unleveraged annual return the building throws off. What counts as a good one in Rhode Island depends on the property type, location, and condition, so there is no single magic number, and any figure you hear is a market estimate rather than a promise. As a general frame, cap rates in stronger, lower-risk locations tend to be lower because buyers accept less yield for more stability, while higher cap rates usually signal more risk, more work, or a softer neighborhood. A well-kept multi-family in a desirable RI area will typically trade at a lower cap rate than an older, deferred-maintenance triple-decker in a rougher pocket. Lower cap rate is not automatically worse, and higher is not automatically better. A high cap rate can reflect real problems like heavy repairs, high vacancy, or a tough rent-collection environment. Here is the Rhode Island wrinkle that trips up a lot of new investors. Our property taxes are relatively high and vary a lot by city, and taxes come straight out of net operating income. That means two buildings with identical rents can show very different cap rates simply because one sits in a higher-tax city. Always calculate the cap rate on the actual tax bill and the actual expenses, not on optimistic seller numbers or market rents that are not being collected yet. Insurance, water and sewer, maintenance reserves for older buildings, and realistic vacancy all belong in the expense side too. Leaving them out inflates the cap rate and makes a mediocre deal look great. My honest advice is to stop chasing a target number and instead underwrite each property on its real income and its real costs, then compare it against other RI deals you are seeing. Run the specific building through the cash-flow calculator to get a true net operating income and cap rate, and contact David for local context on what similar rentals are actually trading at.