There are few, hard and fast rules regarding an appropriate cape rate (i.e. number), as each should be selected based on the unique characteristics, and market factors, regarding the property under consideration. For example, you can have two nearly identical properties, built at the same time, from the same plans and materials, and they could have vastly different rates.
More specifically, the cap rate should reflect the durability, and probability of of the income stream you are capping. Also, coming into play, regardless of your forecast, is market expectations, and market demand in general, for the property type, location, and credit, if any.
All other factors being equal, the greater the risk, regarding the durability,desirability and probability of the income stream, the higher the cap rate; conversely, less risk regarding durability and probability and the greater the desirability, of your fellow market participants, the lower the cap rate.
I would say the vast majority of all caps rates fall in the broad range exhibited, in your question, but there are exceptions; assuming, especially. if your are applying them to actual existing income.
Dec 9, 2014