Let's follow the situation of a family preparing to move to Austin. They planned to buy a condo and rent it out, but while deciding to utilize more than half of their loan, they considered the cap rate and cash on cash return as the same concept. The first concern that arose was why these two numbers were different.

The average home value in Austin is $511,264 (according to Zillow, down 5.7% over the past year). When looking at the entire Austin metro area, the median sale price is around $440,000 (as of April 2026). The average rent for apartments is $1,638, which has decreased by 2.09% compared to the previous year (RentCafe, as of August 2026). Calculating the total return with these numbers gives an annual rental income of $19,656 divided by the purchase price, resulting in about 3.8%.

This family's initial confusion started here. By subtracting property taxes, insurance, and management fees from the total return of 3.8%, you arrive at the cap rate. The property tax rate in Travis County, where Austin is located, is about 1.34% at the county level, and additional rates from the city and school district apply. Applying the 50% rule, the net operating income drops to about $9,828 annually, and the cap rate falls to approximately 1.9%. In the high-priced Austin market, this number tends to be lower than in other cities.

Next, the family checked the cash on cash return. While the cap rate is based on the total purchase price, cash on cash return is based only on the actual down payment and closing costs. Since they decided to utilize more than half of the loan, the actual cash invested was less than half of the purchase price, which means the cash on cash return could be higher than the cap rate. However, they also noted that as the loan interest burden increases, the monthly cash flow could decrease.

Finally, the family broadened their perspective to total returns. Although Austin has been in a correction phase with declining home prices over the past year, it appears to be a market where long-term capital appreciation and asset growth from loan principal repayment can also be considered. However, this should not be seen as a definitive prediction of price increases, but rather as a point that is not visible through cash flow return alone.

They also checked using the 1% rule. Dividing the rent of $1,638 by the purchase price of $511,264 results in about 0.32%, indicating that according to this rule of thumb, the market is far from being a cash flow investment. In a market like Austin, where price adjustments are ongoing, even if the cap rate is low, many consider the potential for capital appreciation after the adjustment period is somewhat complete. The final checklist the family organized included the following items:

• Did they calculate the cap rate and cash on cash return based on different criteria?
• Did they add together the property taxes from Travis County, the city, and the school district?
• Did they decide which to prioritize between short-term cash flow and long-term capital appreciation?

Austin is also a city where there is a significant difference between the sale prices in the city center and the entire metro area. The median price in the city center rises to between $570,000 and $630,000, while the overall metro median price, including nearby counties, is around $440,000. Depending on which range is used as a basis, the total return calculation can vary significantly, so it is important to first distinguish whether the property is in the city center or the outskirts when calculating. The Travis County property tax of 1.34% is only the county portion, and when the rates from the city and school district are added, the actual burden is greater than this.

Austin is a city often mentioned in relation to the preferred school districts for Korean families and the demand for relocation from other states. School district boundaries change frequently, so it is advisable to check the assigned school before purchasing. It is easy to overlook that the property tax in Travis County is additionally charged by the city and school district. This is not investment advice or legal advice, and it is recommended to consult with a professional before making any actual contracts.