There have been inquiries calculating the yield based solely on the rent compared to the purchase price at around 6 percent. The numbers themselves are not incorrect, but they omitted management fees. When you hire property management, 8 to 12 percent of the rent is deducted each month, which was completely left out of the calculations.

The average home value in Gaithersburg is $494,924 (Zillow, as of June 2026), and the average rent is $2,440 per month. This results in an annual rental income of $29,280.

The total yield calculated from these numbers is 5.9 percent. If you stop the calculation here without including management fees, it appears more profitable than it actually is. To calculate the cap rate, you need to subtract property taxes, insurance, management fees, maintenance costs, and vacancy losses.

If you assume operating costs are half of the rental income based on the 50 percent rule, the net operating income is $14,640. The cap rate comes out to about 3 percent, which is nearly half of the number calculated without deducting management fees.

The effective property tax rate in Montgomery County is 0.87 percent, ranking 15th among the 24 counties in Maryland (Montgomery County, 2025-2026 tax rate data). In addition to the county rate, there may be additional items like fire taxes, so please check the property address for confirmation.

In addition to omitting management fees, it is common to not include maintenance costs at all in calculations. As a rule of thumb, maintenance costs are typically estimated at about 1 percent of the asset value annually, which for Gaithersburg is around $4,950. Omitting this single item can significantly inflate the cap rate.

To check the cash-on-cash return, you need to include the down payment, closing costs, and mortgage principal in the calculations. The method divides the pre-tax cash flow after subtracting the mortgage principal from the net operating income by the actual investment amount, so if management fees are omitted, this number will also be inflated.

• Total Yield = Annual Rental Income / Purchase Price x 100
• Cap Rate = Annual Net Operating Income / Purchase Price x 100
• Cash-on-Cash Return = Annual Pre-Tax Cash Flow / Actual Investment x 100

Gaithersburg is a region with several school districts preferred by Korean families, so rental demand is generally steady. However, school district boundaries change frequently, so while referring to ratings from GreatSchools or Niche, please verify the assigned school for the property address.

The rent in Gaithersburg is about 21 percent higher than the national average and has increased by $79 per month in the past year (Zillow, as of June 2026). The fact that rents are consistently rising is a positive factor in estimating net operating income, but care should be taken not to inflate yields by prematurely including the increase in calculations.

Vacancy loss is another item that is often omitted as frequently as management fees. Considering the possibility of one or two months of rent being vacant between tenants, it is more realistic to set aside about 5 to 8 percent of the annual rental income for vacancy loss. Including this item may result in a cap rate slightly lower than the previously calculated 3 percent.

When calculating cash-on-cash return, the omission of management fees similarly affects the outcome. If the net operating income is inflated and the mortgage principal is subtracted, the pre-tax cash flow will also be inflated, making the perceived return on actual investment appear better than it is. It is essential to develop the habit of checking that the property management fee item is not left blank when entering numbers into the calculator.

Gaithersburg has maintained a median level for both purchase prices and rents within Montgomery County, leading to consistent inquiries from both families relocating from other states and investors. However, it is no exception in this area that to see a picture closer to the actual net operating income, property taxes and management fees must be included in the calculations.

Developing the habit of reviewing each operating cost item before entering numbers into a calculator ultimately leads to accurate judgments. Since investment and tax-related matters can vary by county, it is advisable to consult with real estate and accounting professionals before finalizing any contracts.