Recently, a reader reached out after using an online rental yield calculator, reporting that the results seemed strange. They had only entered the purchase price and monthly rent, and the yield came out to nearly 5%. They questioned whether such a good investment was indeed accurate.

The number shown by the calculator is mostly the total yield. As of 2026, the median home price in Fairfax is about $722,600, and the monthly rent is around $2,650 (Zillow Rental Manager). Dividing the annual rental income of $31,800 by the purchase price gives a total yield of 4.40%. This is usually the value displayed on the calculator screen.

The problem is that this figure does not account for property taxes, insurance, or management fees at all. The effective property tax rate in Fairfax is about 0.90%, and the median annual tax reaches $6,515 (taxbycounty.com). When you add insurance, maintenance costs, vacancy losses, and management fees, operating expenses often account for nearly half of the total rental income.

When reflecting this, the net operating income recalculates to about $15,900 annually, and the cap rate drops to 2.20%. The gap between the calculator's 4.40% and the actual cap rate of 2.20% is ultimately the portion that goes towards taxes and operating expenses.

Here are the key items to check when using the calculator:

• Total yield - the value obtained by dividing annual rental income by the purchase price, without accounting for expenses
• Cap rate - the value obtained by dividing net operating income by the purchase price, accounting for taxes and management fees
• Cash-on-cash - pre-tax cash flow compared to actual cash invested, varies based on loan conditions

Considering a purchase with a loan changes the picture again. Assuming a 25% down payment and a 30-year mortgage at an interest rate of around 6.75%, it is common for the annual principal and interest payments to exceed the net operating income, resulting in a cash-on-cash value that could be a negative number, lower than the cap rate.

However, this does not mean that investing in this area is necessarily bad. Fairfax is a region where Korean families prefer school districts, and areas with high ratings from Fairfax County Public Schools tend to have lower vacancy risks. However, school district boundaries change frequently, so it is advisable to check the assigned school for the specific address before purchasing.

When applying the 1% rule, the difference becomes even more pronounced. 1% of the purchase price is $7,226 per month, but the actual rent is $2,650, which is only about 0.37% of the purchase price. If you only look at the 4% total yield shown by the calculator and expect a comfortable cash flow, there could be a significant discrepancy from actual experience.

Those looking for investment properties for the first time from out of state often overlook closing costs. In Virginia, there are additional costs associated with the purchase process, such as transfer taxes and registration fees, which are a percentage of the purchase price, effectively increasing the initial investment. The purchase price entered into the calculator alone does not capture these costs.

Still, Fairfax is known for having steady rental demand due to the presence of many federal government and related industry workers. However, whether this demand characteristic continues in the future may depend on the local job market situation, making it difficult to make definitive statements.

The numbers produced by entering only the purchase price and monthly rent into the calculator are merely a starting point. You need to subtract property taxes, insurance, management fees, and vacancy losses one by one to get closer to the actual cap rate, and only by adding loan conditions will you finally arrive at the cash-on-cash figure.

For families who have recently immigrated from Korea, it is often more common to assess the area through renting first rather than considering a purchase right away. In this case, the cap rate concept discussed above is still useful. It can serve as a benchmark to determine whether the rent set by the landlord is reasonable compared to the market rate in that neighborhood.

Rather than making judgments based solely on a single calculator number, it seems more realistic to separately evaluate total yield, cap rate, and cash-on-cash, and then add in potential appreciation to make a decision. This article does not constitute investment or legal advice, and it is recommended to consult real estate and accounting professionals before making any contracts.