Multifamily Investing

Cap Rates in Kansas City Right Now

A cap rate is Net Operating Income divided by purchase price. A property with $30,000 in NOI listed at $400,000 is a 7.5% cap rate. The lower the cap rate, the more you're paying per dollar of income the property produces — and right now, a lot of Kansas City multifamily listings are priced for a world that no longer exists.

In 2021 and 2022, buyers accepted 4-5% cap rates because debt was cheap enough — around 3.5% — that the numbers still cash-flowed. Rates are now 6.5-7%+, and those same cap rates create negative leverage: you're paying more to borrow than the property returns. Sellers who bought or refinanced at those low rates haven't adjusted their asking prices as fast as buyer math has changed, which is exactly why so many KC multifamily listings are sitting unsold right now.

Submarket cap rate ranges I'm seeing on actual closings, not listings

KC proper, desirable areas (Brookside, Waldo, Midtown): 5.5–6.5% for stabilized, turnkey properties
KC proper, improving/transitional areas: 7–8.5%+, higher for deferred maintenance or management challenges
Independence, Raytown, Blue Springs: 7–8%, more inventory, more negotiable sellers
Kansas City, KS (Wyandotte County): 8–10%+ on paper — scrutinize actual collections and maintenance costs before trusting that number
North KC, Gladstone, Liberty: 6.5–7.5% depending on condition and location
Overland Park, Lenexa, Olathe (Johnson County): 5.5–6.5%, a premium for schools and demographics, lower vacancy risk

How I evaluate a deal, step by step

Build your own NOI — don't trust the listing's. Use actual rents, and normalize expenses to a realistic 45-55% expense ratio.
Apply the appropriate submarket cap rate to get a supportable value.
Compare that to the asking price. A gap needs to come off the price, or be justified by real value-add upside.
Check debt service — I look for a Debt Service Coverage Ratio of at least 1.2, meaning NOI is 20% more than what the debt costs.

Watch for the cap rate trap: listings that advertise a "stabilized" or pro forma cap rate based on projected post-improvement rents, not current actual income. The upside from those improvements should belong to you as the buyer — not get paid for upfront to the seller.

Bottom line: a lot of listings are priced to 2021 cap rates with 2025-and-later interest rates, which is exactly why deals aren't penciling out for a lot of buyers right now. The deals that do work are the ones priced right from the start, found off-market before they ever hit a public listing, or that have sat long enough that sellers are starting to adjust to reality.

Cap Rates in Kansas City Right Now

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