A client looking for their first investment property in Tacoma once asked what rental yield really means. They were curious why the yield stated in the property description differed from the actual money left in hand.

The median home price in Tacoma is about $485,000 as of 2026 (Houzeo). This is definitely lower than prices in Seattle or Bellevue. The monthly rent is around the median of $1,638 (Zumper, August 2026). Dividing the annual rental income of $19,656 by the purchase price gives a total yield of 4.05%.

Tacoma is part of Pierce County. The effective property tax rate in this county is about 1.05%, which is higher than the nearby King County (0.85%). The median annual tax is $5,024 (propertytaxalmanac.com). To find the net operating income, you must also add insurance, maintenance costs, management fees, and vacancy losses.

Using the 50% rule, the net operating income is $9,828 per year, and the cap rate is 2.03%. This is half of the total yield of 4.05%, but it is still higher than the cap rates in Seattle (1.34%) or Bellevue (1.17%). Even though the purchase price is lower, the cap rate remains relatively better despite the slightly higher property tax rate.

What happens if you take out a loan? Assuming a 25% down payment and a 30-year mortgage at an interest rate of around 6.75%, the annual principal and interest payments exceed the net operating income. The cash on cash return is around -14%. If the neighborhood has higher rents, the outcome may improve slightly, while it could worsen in areas with lower rents.

In Tacoma, conditions can vary significantly by neighborhood. Areas with a concentration of Korean families tend to have stable rental demand. However, school district boundaries change frequently, so it's advisable to check the assigned school for the specific address before purchasing.

According to the 1% rule, Tacoma is relatively better among the areas examined. 1% of the purchase price is $4,850 per month, but the actual rent is $1,638, which is about 0.34% of the purchase price. While it falls short of the 1% rule, the gap is smaller compared to the 0.2% range in Seattle or Bellevue.

Established neighborhoods like North Tacoma or Proctor have relatively high purchase prices, while newly developed areas often have lower prices. Even within the same city, total yield and cap rates can vary significantly depending on the neighborhood.

Some lower-priced properties include older homes, so it's particularly important to check the condition of the roof, plumbing, and electrical systems through an inspection rather than deciding based solely on the cap rate. If initial repair costs are significantly higher than expected, the cap rate calculation may become meaningless.

Tacoma is a popular starting point for those looking for their first investment property due to its lower purchase price compared to Seattle and Bellevue. However, a lower purchase price does not necessarily mean a good investment, so it's important to check the condition and rental history of individual properties.

I showed that client the total yield, cap rate, and cash on cash return side by side on one page. As we calculated them in order, explaining why the numbers decreased each time and which costs were deducted at each stage, they finally seemed to understand why the yield stated in the property description differed from the actual figures.

Ultimately, whether in Tacoma or any other area, it's important not to make judgments based solely on the yield stated in the property description. Only after reviewing the total yield, cap rate, and cash on cash return can one determine if the property aligns with their investment goals.

It's safer not to focus solely on the yield number in the property description, but to calculate the total yield, cap rate, and cash on cash return individually. Don't forget to consider the total return perspective, including potential appreciation. This article does not constitute investment or legal advice, and it is recommended to consult a professional before making any contracts.