Cap rates & valuation
What is a good cap rate for an NNN property?
An NNN cap rate measures a property’s annual net operating income relative to its purchase price. It does not measure total investment return or guarantee future income.
The short answer
A good NNN cap rate cannot be reduced to one percentage. The appropriate rate depends on the tenant and guarantor, lease term, property location, rent increases, lease structure, building quality, and future resale risk. A higher cap rate generally means more initial yield, but investors need to understand why the market is offering it.
Read the full answer ↓How is an NNN cap rate calculated?
An NNN cap rate compares a property’s net operating income (NOI) with its purchase price:
Cap rate formula
Cap rate = Net operating income ÷ Purchase price × 100%
For example, if a property produces $300,000 in annual NOI and costs $5 million, its cap rate is 6%.
The Federal Reserve emphasizes prudent commercial real estate analysis that considers factors such as cash flow, collateral values, market conditions, and borrower performance rather than relying on a single metric.
That same discipline matters when evaluating an NNN leased property.
What determines a good NNN cap rate?
A buyer should evaluate an NNN cap rate alongside:
- Tenant and guarantor financial strength
- Remaining lease term
- Rent increases
- Location and underlying real estate
- Landlord obligations
- Property condition
- Renewal and exit risk
6.9%
Average U.S. net-lease cap rate
4.5%
Average 10-year Treasury yield
$12.8B
U.S. net-lease investment volume, up 13% year over year
Source: CBRE Q2 2026 U.S. Net-Lease Investment Report. Broad market figures, not a target cap rate for every NNN property.
According to CBRE’s Q2 2026 U.S. Net-Lease Investment Report, the average U.S. net-lease cap rate was 6.9%, compared with an average 10-year Treasury yield of 4.5%. U.S. net-lease investment volume reached $12.8 billion, up 13% year over year. These are broad market figures, not a target cap rate for every NNN property.
A 5% cap rate on one NNN property and a 7% cap rate on another do not necessarily mean the second investment is better. A higher initial yield may compensate for weaker tenant credit, shorter lease terms, or greater resale risk.
Example
A property with five years remaining on its lease may require a different risk assessment than one with 15 years remaining, even when both have the same tenant. Lease expiration affects income certainty and potential reletting costs.
Key NNN cap rate terms
- Net operating income (NOI)
- Property income remaining after applicable operating expenses, before financing and certain other items.
- Cap rate
- NOI divided by property value or purchase price.
- Basis point
- One-hundredth of one percentage point. For example, 50 basis points equals 0.50%.
- Guarantor
- A person or legal entity that guarantees specified tenant obligations under the terms of a lease guarantee.
- NNN lease
- A commercial lease generally requiring the tenant to pay base rent plus property taxes, insurance, and specified maintenance expenses.
- Exit cap rate
- The capitalization rate assumed when estimating a property’s future resale value.
Investors researching NNN real estate for sale should compare cap rates only after understanding these underlying variables.
Key takeaways
- There is no universal “good” NNN cap rate.
- A higher cap rate generally provides more initial yield, but may reflect greater risk.
- Tenant credit and lease terms matter alongside the percentage.
- Investors should verify NOI before calculating the cap rate.
- Compare risk-adjusted opportunities, not percentages alone.
Our NNN investment information covers additional factors buyers should evaluate.
Cap rate is the beginning of the analysis, not the investment conclusion.
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