A person looking to buy a condo in Allston to rent out initially left out property taxes and insurance from their calculations. Since the rental prices are quite high in the area, the total return looked satisfactory based only on that figure. But how much would that number change if we included property taxes and insurance? And if they financed the purchase, how would the cash-on-cash return be affected?

Looking at the rental levels in Allston, the average rent in 2026 is projected to be between $3,062 and $3,205, with two-bedroom units reaching up to $3,900. While this is somewhat lower than Boston's overall average of $3,263, it is still significantly higher compared to the national average. As for purchase prices, the median sale price for condos in May 2026 was $634,786, with the median listing price at $550,000. Compared to Boston's overall median condo price of around $725,000, Allston is relatively more affordable.

So, how much would the property tax be? Boston's residential tax rate for the 2026 fiscal year is $12.40 per $1,000, with an effective tax rate of about 1.16 percent. However, this rate includes a substantial residential exemption that applies to primary residents, meaning that investment condos rented out do not benefit from this exemption and face a higher actual tax burden. This was the item that was missing from the initial calculations.

Calculating based on a two-bedroom rental, the annual rental income of $46,800 divided by the purchase price of $634,786 gives a total return of 7.37 percent, which is quite high. But how would this change if we subtract operating expenses? Applying the 50 percent rule and assuming operating expenses are half of the rental income, the NOI would be around $23,400 annually, and the cap rate would be calculated at about 3.69 percent. While the tax rate itself is similar to the national average at 1.16 percent, the fact that exemptions do not apply to investment properties and that HOA fees are added due to the nature of condos means that the actual proportion of operating expenses could be even higher.

For a studio, the annual rental income of $28,368 divided by the median condo sale price of $634,786 results in a total return of 4.47 percent, which is lower than that of a two-bedroom. Conversely, expanding to three bedrooms raises the annual rental income to $43,200, with a total return of 6.80 percent. The trend of increasing total returns with larger unit sizes is particularly pronounced in Allston, where many rentals are shared among roommates due to its proximity to universities.

What about the cash-on-cash return? Assuming a financed purchase, we would calculate the pre-tax cash flow against the actual cash invested, including down payment and closing costs, which could result in a cap rate higher or lower than 3.69 percent depending on the loan terms and interest rates. The cap rate reflects profitability under the assumption of a cash purchase, while cash-on-cash represents the actual perceived return, making it increasingly important to distinguish between the two in high purchase price areas like Allston.

Due to its university area characteristics, Allston has a steady demand for student rentals, and there are many small units available for investors. If Korean families are considering living there, it may be worth comparing it with nearby areas that have more stable school districts. School ratings can be checked on GreatSchools or Niche, but since boundaries change frequently, it's advisable to verify the assigned school for the specific address before purchasing.

If moving from another state, especially from areas with lower property taxes to Massachusetts, the difference in exemption structures may lead to a higher perceived tax burden than expected. It's essential to look beyond just the total return and check the cap rate reflecting property taxes and insurance, as well as the cash-on-cash return considering loan conditions to reveal the actual income structure. This article does not constitute investment or legal advice, and tax rates and exemption conditions may vary by property, so consulting a professional before finalizing any contracts is recommended.