In the world of net lease investments, the Cap Rate is often the headline number. It’s front and center on every Crexi listing, flyer, and broker pitch. But here’s what seasoned investors know:

The Asking Cap Rate only tells you what the seller wants to earn — not what you’ll actually earn.

To make smart buying decisions — especially in a market where tenant credit, rent escalations, and lease terms vary widely — you need to look at the Blended Cap Rate.

In this article, we’ll explain exactly what it is, how to calculate it, and why focusing on blended return gives you a more realistic picture of long-term performance. We’ll also share which U.S.-based tenants offer the strongest lease structures for predictable, inflation-resistant blended cap performance.

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🔹 What Is a Blended Cap Rate?

The Blended Cap Rate is the average return over the full lease term, including all contractual rent escalations — not just the return based on Year 1 NOI.

It’s a more accurate way to assess:

• Real income growth

• Inflation hedging

• True long-term yield

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Here’s the Problem with Asking Cap Rates:

Let’s say a Chick-fil-A property is listed for $3,000,000 at a 5.00% Cap Rate based on Year 1 rent. Sounds great — but what if that rent grows 10% every five years?

Your actual return over the next 15 years is much higher than 5.00%.

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Example: Calculating the Blended Cap Rate

Tenant: Starbucks
Purchase Price: $2,500,000
Initial NOI: $125,000 (5.00% Cap Rate)
Escalations: 10% every 5 years
Lease Term: 15 years

Here’s how NOI grows:

• Years 1–5: $125,000

• Years 6–10: $137,500

• Years 11–15: $151,250

Total Income Over Lease:
($125,000 × 5) + ($137,500 × 5) + ($151,250 × 5) = $2,068,750

Blended Cap Rate:
$2,068,750 ÷ 15 years = $137,916 avg annual income
$137,916 ÷ $2,500,000 = 5.52% Blended Cap

That’s 52 bps higher than the advertised 5.00%. In inflation-adjusted terms, that delta matters.

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🔹 Why Blended Cap Rate Matters More in Today’s Market

With interest rates elevated, smart investors are demanding real income growth — not just flat rent and a shiny headline cap. Here’s why the blended rate should be your focus:

1. It Reflects True Yield

If your lease includes rent bumps every 5 years, your blended return will outperform the initial cap rate — even if the deal looks “low” on paper.

2. It Helps You Compare Deals Accurately

Two deals both priced at a 5.25% cap:

• Deal A: No escalations

• Deal B: 10% bumps every 5 years
  Guess which one will yield more over the term?

3. It Shows Inflation Protection

Flat leases lose ground to inflation. Blended rates reveal which tenants help you stay ahead.

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🔹 Tenants with Strong Blended Cap Performance

Some tenants structure leases with built-in rent escalations, making them stronger long-term holds. Here are examples of U.S.-based tenants known for consistent rent growth and low management:

🟢 Best for Blended Cap Rate Growth

These tenants not only offer passive income — they help your income grow over time, improving blended return and resale value.

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🔹 Tenants with Poor Blended Return (Flat Rent)

Some national tenants — while creditworthy — offer flat rent for 15–20 years. That makes their Year 1 Cap Rate your real yield — forever.

🔴 Caution: Flat Rent Leases

Flat rent isn’t inherently bad — but your blended cap = asking cap, and there’s no growth.

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🔹 Bonus: How Blended Cap Rate Helps on Resale

Let’s say you’re planning to hold a NNN Taco Bell for 7–10 years, then sell.

If your lease has stepped-up rent every 5 years, your NOI in year 7 or 10 will be significantly higher than at purchase — meaning you can likely resell the asset at a higher price or same cap and recapture appreciation, even in a flat market.

Flat leases don’t allow for that — they depreciate in real terms, especially near lease maturity.

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FAQ – Blended Cap Rate in Net Lease Deals

Q1: How do I calculate the blended cap rate myself?

Add up the total NOI over the full lease term using the rent schedule (including escalations), divide by the number of years to get the average annual NOI, then divide by the purchase price.

Blended Cap Rate = Avg Annual NOI ÷ Purchase Price

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Q2: Why would a seller not highlight the blended rate?

Because the asking cap rate looks better upfront. It’s easier to market a 5.25% cap, even if the rent stays flat. Blended rates require more analysis, which is why savvy investors use them to uncover undervalued deals with real growth.

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Q3: Should I avoid tenants with flat rent?

Not necessarily. Tenants like Dollar General and Walgreens are highly sought after for corporate credit and long-term stability. But be aware:

• You’re not getting inflation protection

• Resale could be harder without rent bumps
  Make sure the cap rate is high enough to justify the flat rent.

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Conclusion: Ask Better Questions, Earn Better Returns

The Asking Cap Rate is a good starting point — but it’s only half the story. When you start evaluating blended return over the full lease, you unlock a smarter way to invest:

• Better visibility into long-term yield

• Smarter comparisons between tenants

• More confidence in exit planning

In today’s rate-sensitive market, chasing headline caps without understanding real yield is a mistake.

Want help underwriting blended cap returns across active listings — or need access to credit-tenant deals with inflation-resistant leases?

Let’s transact.