Kings County, NY Cap Rates by Neighborhood

The Headline Yield Masks What Actually Matters

Brooklyn's countywide gross yield sits at 4.74%, computed on a median price of $948,173 and median rent of $3,742 per month. That number is nearly useless for underwriting a specific deal. It blends a $550,000 East New York rowhouse with a $2 million Carroll Gardens brownstone, a rent-stabilized six-unit with a free-market new-construction condo, and a coastal Canarsie property carrying unresolved flood insurance exposure. The aggregate washes out every signal worth acting on.

What matters is the spread between sub-markets, the trajectory of rents versus prices, and the tax and insurance drag that converts a gross yield into a net cap rate you can actually defend to a lender or partner. Each of those inputs looks very different depending on where in Brooklyn you are buying.

Gross Yield by Neighborhood Tier

The brief supports three broad pricing tiers, each implying a distinct gross yield range.

Gross yield estimated by applying countywide median rent of $3,742/mo to each price tier. Actual rents vary by unit type and sub-market.

East New York is the only Brooklyn sub-market where gross yield approaches a level that can plausibly survive a realistic expense load and still produce positive returns. At $550,000 and an 8%+ gross yield, there is room to absorb taxes, insurance, and maintenance before NOI disappears. Williamsburg and Carroll Gardens are pure appreciation plays: at 2.2%–2.9% gross, no reasonable capital structure produces cash flow without real rent growth.

Crown Heights at 4.5%–5.1% gross sits at the inflection point. Income per capita there rose 112.3% from 2010 to 2022, and the price gap versus Park Slope narrowed from 73% to 46% between 2020 and 2025. The appreciation thesis is well advanced. The window to enter at yields that still pencil is closing.

Property Tax Drag: The Line Item That Kills Brooklyn Deals

Brooklyn's tax exposure has become a serious underwriting variable, not background noise.

For FY2027, Brooklyn led all NYC boroughs in taxable billable assessed value growth for Class 2 rental apartments: +14.2%. Mayor Mamdani is weighing a 9.5% across-the-board property tax increase on top of that, to close a $5.4 billion city budget gap. The existing system already taxes multifamily rentals at roughly double the effective rate of condos and co-ops.

Here is the dollar math on a representative Brooklyn multifamily purchase at the median price:

• Purchase price: $948,173
• Gross annual rent (4.74% yield): $44,961
• Property tax estimate at NYC effective Class 2 rate (~2.5% of assessed value): $23,700 per year (rough estimate at median price)
• Tax as a percentage of gross rent: ~53%

A 9.5% tax hike on that base adds roughly $2,250 annually per property unit. On a six-unit building at median pricing, that is about $13,500 in additional annual tax expense coming directly out of NOI. Stress-test your underwriting with this scenario before signing a contract.

The Class 2 assessed value increases are locked in for FY2027 with no near-term reversal mechanism. Any Brooklyn multifamily buyer in 2025 or 2026 is acquiring into an accelerating tax expense environment.

Rent vs. Price: Where Cap Rates Are Moving

Rents in Brooklyn rose 8.7% year-over-year through November 2025, reaching a median of $3,804 per month. The median home price, by contrast, ended 2025 flat year-over-year at about $998,000, though price per square foot rose 6.4% to $1,019.

This divergence is the one favorable signal for yield-focused buyers. When rent growth outpaces price appreciation, gross yields expand at the margin. A property you could have bought in late 2024 at 4.74% gross yield now produces closer to 5.1%–5.2% gross if your rent resets to current market.

Investment sales volume rose 37% in 2024 to $7.15 billion, and Q4 2025 volume hit $1.294 billion, the strongest Q4 since 2022. Institutional buyers are not sitting out. The record price per square foot of $582 achieved in 2024 sets a price floor. If institutional demand holds and rent growth continues above price growth, yields may expand another 25–50 basis points over 12–18 months before price appreciation catches up. That window is narrow.

Active listings were still 17% below the 10-year average in early 2025 despite modest inventory gains. Rental inventory was 4% below prior-year levels through late 2025. Neither condition supports cap rate decompression from the demand side.

Good Cause Eviction: The Invisible Cap Rate Ceiling

Even where gross yields look workable, Good Cause Eviction law caps rent increases in unregulated units and restricts non-renewals. Rent-stabilized lease renewals are capped at 2.75%–5.25% by the Rent Guidelines Board. For investors underwriting value-add strategies that depend on resetting rents to market on turnover, Good Cause Eviction eliminates the primary mechanism for realizing that upside in Brooklyn's large regulated stock.

If your pro forma assumes above-guideline rent bumps as a primary return driver in a rent-stabilized building, that return does not exist under current law. Net effective cap rates on rent-stabilized assets are lower than their gross yields suggest.

Flood Insurance Adjustment to Net Yield

About 26% of Brooklyn properties (7,208 properties) face severe flood risk over 30 years. In coastal sub-markets including Red Hook, Coney Island, Marine Park, and Canarsie, flood insurance is a direct expense line on the operating statement. FEMA's Flood Insurance Rate Maps have not been updated since 1983. NYC filed a technical appeal in 2015, FEMA agreed to revisions in 2016, and revised maps remain pending. That means current premiums may not reflect actual climate-adjusted risk.

For coastal Brooklyn properties, add flood insurance cost to your expense underwriting and model a reclassification scenario. An upgrade from a preferred zone to a high-risk SFHA designation can add $3,000–$8,000 annually in premium depending on property size and structure. At a 5% gross yield on a $950,000 property, a $6,000 insurance increase represents a 13% reduction in gross NOI before any other expenses. That moves a breakeven deal into negative cash flow territory.

ADU value-add strategies are also prohibited in FEMA SFHAs under the City of Yes rules, which eliminates the income-add pathway for affected properties. Coastal Brooklyn and ADU conversion do not mix.

ADU Yield Uplift: Where It Works

For the subset of Brooklyn properties where ADUs are viable, the income uplift is real. City of Yes (December 2024) legalized ADUs up to 800 square feet in one- and two-family homes in R1–R5 zones, with ADU filings opened through DOB NOW in September 2025. Parking mandates for conversions are eliminated, reducing conversion cost.

Eligible neighborhoods include Bay Ridge, Dyker Heights, Bensonhurst, East New York, and Flatlands. Only about 12% of NYC residential lots meet all zoning, lot-size, and dimensional requirements, so eligibility must be confirmed parcel-by-parcel. In East New York, where entry prices run near $550,000 and gross yields are already above 8%, a conforming ADU adding $1,800–$2,200 per month in additional rent lifts gross yield by another 3.9%–4.8% on a property already purchased at a lower basis. That is where ADU yield math actually works.

In Williamsburg at $1,550,000, the same ADU rent adds only 1.4%–1.7% to gross yield, and you face higher lot-coverage, dimensional, and historic-district hurdles. The ADU opportunity is concentrated in South and Central Brooklyn's lower-basis markets, exactly where transit-desert discounts already provide some cushion.

Cap Rate Outlook

Brooklyn's net cap rate environment will tighten from the expense side even if gross yields hold or modestly expand. The FY2027 assessed value increase of 14.2% for Class 2 apartments is already locked in. A 9.5% citywide property tax hike, if enacted, compounds that. Good Cause Eviction constrains rent resets. Coastal flood insurance reclassification risk is unresolved and will not become clearer until updated FEMA maps are published.

On the upside, the Interborough Express entering the engineering and design phase in August 2025 creates a long-dated appreciation option in East New York, Brownsville, and East Flatbush. Construction remains a 2030s event, but land basis in those corridors is still priced as transit desert. The $5.9 million in planning studies for Central Brooklyn Community Boards 12, 14, and 17 signals future upzoning in Flatbush and East Flatbush, which would lift development site value in that corridor over a 3–5 year horizon.

For net cap rate investors, the actionable strategy in 2026 is: underwrite conservatively on taxes (model the 9.5% hike), eliminate coastal flood-risk properties from ADU deal flow, concentrate on East New York and Central Brooklyn where entry basis leaves room for expenses, and treat IBX corridor exposure as an option embedded in a deal that pencils at current rents, not a return driver.

Model your specific deal with our investment property calculator to stress-test tax escalation, flood insurance, and rent growth scenarios against your target cap rate.