A real estate investor considering renting out a Manhattan condo once showed me their calculations for total yield. The yield, based solely on the purchase price and monthly rent, looked quite attractive, but it didn't account for the monthly maintenance fees and HOA fees. In a market like New York, where condos and co-ops are prevalent, omitting this one item can completely alter the yield picture.

The average rent in New York is around $4,493 per month as of August 2026 (Zumper). Annualized, that amounts to $53,916, and according to Zillow, the average home value in New York is $823,251. Dividing these two figures gives a total yield of about 6.5 percent, which is relatively high compared to other areas. If the investor made a decision based solely on this number, they would have painted a much more optimistic picture than reality.

To calculate the cap rate, we need to recalculate the net operating income. The effective property tax rate for Class 1 homes in New York City is known to be around 1.2 percent (StreetEasy), so for a property valued at around $820,000, the property tax alone would be about $9,900 per year. When you add in maintenance fees or HOA fees, it's not uncommon for total costs to exceed half of the rental income. Applying the 50 percent rule, we can estimate the net operating income to be around $27,000 per year, bringing the cap rate down to about 3.3 percent. Comparing the total yield of 6.5 percent with the cap rate of 3.3 percent illustrates why maintenance fees are so crucial.

In simpler terms, total yield reflects the surface appearance of the property, while the cap rate shows the realistic picture after deducting maintenance costs. Condos incur HOA fees and maintenance costs, while co-ops have separate maintenance fees, so it's essential to check these items in the listing information when looking at New York properties. If financing is involved, the cash-on-cash return should also be considered separately, as the effective yield can often be lower than the cap rate once mortgage principal and interest are deducted.

When comparing co-ops and condos side by side with the same budget, the differences become more pronounced. Co-ops tend to have lower purchase prices but higher maintenance costs as a percentage of rental income, and some buildings have restrictions on renting due to board approval processes. Condos, on the other hand, generally have higher purchase prices but fewer rental restrictions, though HOA fees can eat into net operating income. Ultimately, even with the same $4,493 rent, the choice of property type can lead to a difference of over one percentage point in cap rate.

I asked the investor to double-check the maintenance fee item, and when the actual monthly maintenance fee listed was factored in, the initially calculated cap rate dropped by nearly one percentage point. As this case illustrates, the mistake of omitting maintenance fees from cap rate calculations often occurs, especially when reviewing properties for the first time. It's advisable to develop a habit of checking monthly maintenance fees, property taxes, and HOA fees separately on the listing page and converting them to annual figures for the net operating income calculation.

When reviewing New York properties, here are the items to check:

• Confirm net operating income by subtracting maintenance fees, HOA fees, property taxes, insurance, and vacancy losses from monthly rental income
• Compare cap rates by dividing net operating income by the purchase price
• Check actual cash flow using cash-on-cash return that includes loan repayments

New York is a market where the structure of maintenance fees varies significantly by property type, so even within the same neighborhood, the effective yields of condos and co-ops can differ. Property tax rates and maintenance fees vary by building and area, so it's advisable to check the recent maintenance history of actual listings. Including capital gains in total returns can also change the outcome, so consider both cash flow and asset appreciation when making judgments. This article is not investment advice, and it is recommended to consult with a real estate professional and accountant before making any contracts.