Recently, there has been an increase in inquiries about comparing the rental yields of two or three properties in Buena Park. Among the cases I reviewed, there was one where I calculated which of three similar-sized single-family homes would yield better rental income, and I would like to follow that process here.

First, I checked the baseline numbers. According to Zillow, the average home value in Buena Park is $832,876, and based on Point2Homes data, the average rent is around $2,397 per month. Based on this, the total yield is calculated by dividing the annual rental income of $28,764 by the purchase price, resulting in a yield of 3.45%.

When comparing the three properties, the total yield alone can easily mix up the rankings. A property with a lower purchase price may show a higher total yield, but it is common for older properties to incur higher maintenance costs. Therefore, in the next step, I calculated the cap rate for comparison.

The cap rate is the value obtained by dividing the annual net operating income by the purchase price. The net operating income is the total rental income minus operating expenses such as property taxes, insurance, maintenance costs, and vacancy losses, excluding mortgage principal and interest. The average effective property tax rate in California, including local bonds and special assessments, is typically known to be between 1.1% and 1.25%. The northern region of Orange County, where Buena Park is located, does not deviate significantly from this range.

Applying the 50% rule, if we assume operating expenses are half of the rental income, the net operating income would be around $14,400 annually, and the cap rate would adjust to about 1.7%. Among the three properties, the older one had to account for higher maintenance costs, which resulted in changes in rankings based on the cap rate.

If financing is used, the cash-on-cash return should also be considered. This metric assesses the pre-tax cash flow relative to the actual cash invested, including down payment and closing costs, and the perceived return can vary based on the loan-to-value ratio. Properties with significant leverage may show a cash-on-cash return higher than the cap rate, but if interest burdens increase, it could actually decrease.

Looking at the overall trend in Orange County, the vacancy rate for multi-family homes in Q2 2026 is 4.3%, which is slightly up from a year ago, but the net absorption has increased by 29.8% compared to the same period last year, indicating strong rental demand. During the same period, the average requested rent was $2,727 per unit, up 1.8%.

Whether the properties are in a school district preferred by Korean families is also a point to consider in the comparison. Neighborhoods with high school ratings tend to have higher purchase prices, resulting in lower yield metrics, but they often have lower vacancy risks and the potential for long-term capital appreciation. Since school district boundaries frequently change, it is advisable to refer to metrics like GreatSchools but also verify the assigned school for the specific address before purchasing.

One aspect that is easy to overlook when comparing the three properties is the concept of total returns. In addition to the monthly rental cash flow, capital appreciation, the increase in assets as the loan principal is paid down, and tax benefits from depreciation should all be included to get the full picture of actual returns. An older property may show a low cap rate, but its lower purchase price could allow for significant capital appreciation, while a newly built property may have lower maintenance costs, leading to stable cash flow. Rather than definitively stating which is better, it is advisable to weigh the pros and cons of the three properties according to each investor's time horizon and objectives. If financing is utilized, it is also worth considering that the principal paid down each month contributes to net worth.

When comparing multiple properties, it is important to look beyond just the total yield; the cap rate and cash-on-cash return should also be considered to see the actual rankings. Additionally, capital appreciation and asset increases due to loan principal repayment must be factored in to complete the overall picture of total returns. This article does not constitute investment or legal advice, and it is recommended to verify the specific conditions of each property with a professional before making any contracts.