A real estate investor looking for rental properties in Savannah checked the property tax in advance but did not account for the flood insurance costs that come with the coastal area's characteristics. It was only right before closing that they discovered the annual insurance premium was much higher than expected. While the low property tax burden is advantageous, the insurance premium can be a significant burden if both aspects are not considered together, which is a common oversight.

According to RentCafe, the average rent in Savannah as of July 2026 is $1,705 per month, while Zumper estimates it slightly higher at $1,900 for the same month. The Zillow Home Value Index indicates that the average home value in Savannah is about $336,000. Dividing the annual rental income of $20,460 by the purchase price results in a total return of approximately 6.1 percent.

According to Ownwell, the effective property tax rate in Chatham County is about 1.04 percent, meaning that for a $336,000 home, the property tax would be around $3,494 annually. When adding the higher-than-average homeowners insurance due to coastal characteristics, management fees, maintenance costs, and vacancy losses, applying the 50 percent rule results in a net operating income of $10,230, which is half of the rental income, and the cap rate drops to about 3 percent. While the rental price relative to the purchase price is favorable, it is important to consider that the insurance burden is greater than in other cities in Georgia.

If an investor puts in $80,000 for the down payment and closing costs and has a pre-tax cash flow of $4,000 left after paying the mortgage principal and interest, the cash-on-cash return would be 5 percent. The fact that this is higher than the cap rate is due to the leverage effect, and if insurance costs rise, this figure will be the first to fluctuate.

• Total Return = Annual Rental Income ÷ Purchase Price x 100
• Cap Rate = Annual NOI ÷ Purchase Price x 100, including property tax and insurance
• Cash-on-Cash Return = Annual Pre-Tax Cash Flow ÷ Actual Cash Invested x 100

According to the 1 percent rule, a $336,000 home should generate a monthly rent of $3,360, but the average rent in Savannah of $1,705 to $1,900 falls short of this. While there is consistent demand for tourism leading some to consider short-term rentals, this area comes with its own regulations and risks. For Korean families interested in the school districts near Savannah, it is advisable to check the GreatSchools ratings, and since school district boundaries change frequently, it is recommended to verify the assigned school before signing a contract. If coming from out of state, it is particularly important to note that coastal insurance premiums are typically higher than those in inland areas.

Given the burden of insurance costs, it is essential to consider factors beyond cash flow when evaluating total returns to maintain balance. Savannah, with its historic district and coastal accessibility, is an area with potential for long-term capital appreciation, and when factoring in asset growth from mortgage repayment and depreciation tax benefits, the total return could present a better picture than the cap rate of 3 percent. While this is advantageous, the fact that insurance renewal conditions can change every hurricane season remains a burden that must be reassessed annually. It is best for readers to weigh both factors in their judgment. Properties near historic districts can also target short-term rental demand, but the conditions for short-term rental permits may vary according to city ordinances, so it is necessary to check this separately for each property. Since different insurance companies have slightly different criteria for calculating flood insurance premiums, obtaining quotes from two or three before closing can help gauge the actual burden. That investor was ultimately able to find a property closer to the originally calculated cap rate only after getting quotes again.

If one overlooks insurance costs while only considering property tax, the cap rate can be significantly lower than initially calculated. It is safer to check both total return and cap rate, along with cash-on-cash return, to understand both burdens in advance. This article is not investment or legal advice, and it is recommended to consult with a professional before finalizing any contracts.