A few years ago, an investor who purchased a duplex in Hartford was optimistic about the rental yield based solely on rent prices, only to have to recalculate after receiving the first property tax bill. The rent price they referenced at the time of purchase was $1,562 for a 2-bedroom unit, but they had only roughly estimated the property tax and insurance costs.

Hartford is a city in Connecticut with particularly high mill rates. For the 2026 fiscal year, Hartford's mill rate is 68.95 mills, and most residential properties in Connecticut are assessed at 70% of their market value. Based on Hartford's average home value of $173,276, the assessed value is approximately $121,293, and the annual property tax, calculated by multiplying this by 68.95 mills, amounts to $8,363. Compared to areas like Greenwich or Westport, where the mill rate is around 11 mills, this is nearly a sixfold difference. Even within Connecticut, the situation can vary significantly depending on the city.

Now, let's calculate the yield. The average rent in Hartford is $1,500, and for a 2-bedroom unit, it is $1,562. If we base the annual rental income on $1,500, it totals $18,000, resulting in a gross yield of 10.4% when divided by the average home value of $173,276. However, when we factor in property taxes of $8,363, along with insurance, maintenance costs, management fees, and vacancy losses, the story changes. Property taxes alone account for 46% of the annual rental income, meaning that the property tax nearly fills the operating expense ratio referred to in the 50% rule. When insurance and maintenance costs are added, operating expenses can exceed rental income.

This is the aspect that the investor in this case overlooked. They judged the total yield based solely on the purchase price relative to the rent, without considering Hartford's uniquely high mill rate in their cap rate calculations. In reality, when all operating expenses are accounted for in the NOI calculation, the cap rate often drops to less than half of the total yield.

According to Rent.com, Hartford's rental prices have increased by 3.07% over the past year. This increase is not insignificant compared to other Connecticut cities, suggesting that the market is reflecting a trend of trying to offset the high property tax burden with rent increases. However, just because rent prices rise does not mean that the property tax burden decreases, so these two figures should not be viewed separately.

Assuming a 20% down payment, the actual cash invested for a property listed at $173,276 would be around $34,655, plus closing costs. If the pre-tax cash flow, accounting for loan interest and property tax burdens, is around $1,000 annually, the cash-on-cash return could be as low as 2.9%. In cities like Hartford with high mill rates, both the cap rate and cash-on-cash return are significantly affected by property taxes, as I have confirmed through handling various properties.

Even within Hartford, areas like West End or Blue Hills, which have relatively high school district ratings, tend to have higher sale prices and rents. Conversely, many investors looking to reduce their property tax burden also compare properties in neighboring towns with lower mill rates, such as West Hartford or Glastonbury. Since school district boundaries frequently change, it is advisable to check the assigned school for the specific address before purchasing. If transitioning from an area with lower property taxes, it is crucial not to estimate based on previous standards of Connecticut's mill rate structure. Remember that the mill rate is applied to the assessed value of 70%, not 100% of the market value, and that mill rates can vary significantly from city to city.

In the long term, it is essential to observe whether capital appreciation or asset growth from loan principal repayment can offset the property tax burden. The fact that Hartford's average home value has increased by 9% over the past year is a positive sign, but capital appreciation cannot be guaranteed to repeat annually, so it is safer to use cap rate and cash-on-cash return as primary evaluation criteria.

This article does not constitute investment or legal advice, and it is recommended to consult a real estate professional before entering into any contracts.