Recently, I calculated the rental yields for three properties in Clarksville side by side. The purchase prices were similar, but the monthly rents varied slightly, making it difficult to determine which was better without crunching the numbers. In such cases, the three key metrics to consider are total return, cap rate, and cash-on-cash return. While their names may sound similar, the calculation methods and the information they provide are different.

The simplest of these is the total return. In simple terms, it is the ratio of annual rental income to the purchase price. According to Zumper, as of June 2026, the average rent in Clarksville was $1,395 per month, and Redfin reported the median home price over the last three months at $315,000. Dividing the annual rental income of $16,740 by the purchase price gives a total return of 5.31%. However, this figure does not account for any expenses, so it is far from the actual profit in hand.

The cap rate is a metric that reflects expenses. It is the value obtained by dividing the annual net operating income by the purchase price, where net operating income is the amount left after deducting property taxes, insurance, management fees, maintenance costs, and vacancy losses. If the terminology is unfamiliar, think of it this way: net operating income is what remains after subtracting the costs of running the property from the total income. In Clarksville, the property tax rate overlaps with the Montgomery County and city rates, and according to Ownwell, the effective property tax rate is 0.75%, which is somewhat higher than Tennessee's median of 0.54%. Applying the 50% rule, which assumes operating costs are half of rental income, the net operating income is $8,370 annually, and the cap rate decreases to 2.66%.

When loans are factored in, the third figure, cash-on-cash return, emerges. This metric shows how much return you get compared to the actual cash out of your pocket, making it closer to the real return for investors using leverage. Assuming a 20% down payment and 3% closing costs, the actual investment amount is $72,450. If a loan of $252,000 is taken out at a fixed interest rate of 6.67% for 30 years, as of August 2026, the monthly principal and interest payment would be $1,621, totaling $19,454 annually. Subtracting this amount from the net operating income of $8,370 results in an annual deficit of $11,084.

When comparing the three properties, this order was consistently evident. The lower the rent multiplier compared to the purchase price divided by annual rent, meaning the home price is relatively low compared to the rent, the better the cash-on-cash return appeared. In this calculation for Clarksville, the multiplier was 18.8 times, and according to the 1% rule, which suggests that if the monthly rent is over 1% of the purchase price, the cash flow is likely to be positive, this property's rent was only 0.44% of the purchase price, falling short of the benchmark. However, compared to other cities discussed this time, it was relatively better.

Clarksville is a steady area for relocation demand due to its proximity to Fort Campbell. When moving from another state, it can be easy to overlook certain aspects based on property taxes or insurance from the previous location. Tennessee has no state income tax, but its property tax and sales tax structures differ, so it's advisable to check in advance. It's also worth noting that areas near school districts favored by Korean families tend to have a fast turnover of properties. School district ratings can be checked on sites like GreatSchools or Niche, but since boundaries change frequently, it's best to verify the assigned school for the specific address before purchasing.

To summarize the order of comparison when evaluating properties:

• First, compare the price level of various properties against rental income using total return.
• Next, filter again using cap rate by reflecting property tax rates and operating costs.
• Finally, check cash-on-cash return by incorporating actual loan conditions before making a decision.

Property tax rates and loan interest rates can vary based on timing, county, and loan conditions, so please consider the numbers in this article as examples only. It's important to verify the latest market prices and tax rates for each property, and consulting with real estate and accounting professionals before signing a contract is advisable. This article does not constitute investment or legal advice, and consulting with experts before any actual contracts is recommended.