Recently, in the market, we often see discussions mixing cap rates and cash-on-cash returns in Torrance. One investor accepted the cap rate figure found online as their expected return while having a loan, but when they recalculated with the actual loan conditions, the numbers changed significantly.

According to Zumper, as of August 2026, the average rent in Torrance is $2,849. Zillow reports the median rent across all property types at $2,800, while RentCafe lists the average at $2,547, showing slight variations in the data. The median home value, according to U.S. News, is $1,003,295, and Redfin reports that the median sale price in the North Torrance area has risen by 3 percent over the past year to $1,100,000.

By bedroom size, studios average $1,746, 1-bedroom units are $2,210, 2-bedroom units are $2,918, and 3-bedroom units are $3,721. As expected in a port-adjacent area, the rent gap by the number of bedrooms is relatively consistent.

Property tax is generally 1 percent of the purchase price under California Prop 13, but with local bonds and special assessments in Los Angeles County, the actual burden often rises to between 1.1 and 1.3 percent. It is advantageous to factor this into your budget in advance, but the varying special assessment items by neighborhood can make calculations cumbersome.

Calculating the total yield, if we apply an average rent of $2,849 to a purchase price of $1,000,000, the annual total rent would be $34,188, resulting in a total yield of about 3.4 percent. It is important to remember that this value does not account for any expenses.

Assuming operating costs at 50 percent of total rent, the net operating income would drop to around $17,094 annually, and the cap rate calculated by dividing this by the purchase price would be 1.7 percent. This cap rate is a favorable benchmark assuming a cash purchase without a loan, but since most investors utilize loans, this figure alone does not provide a clear sense of the effective yield.

The cash-on-cash return takes it a step further. Assuming a 20 percent down payment of $200,000, the cash-on-cash return is calculated by dividing the pre-tax cash flow (net operating income minus monthly mortgage principal and interest) by $200,000. When interest rates are low, this can yield a higher return than the cap rate, but as rates rise, it can fall below the cap rate, which can be a concern.

According to the 1 percent rule, 1 percent of a $1,000,000 purchase price is $10,000, but the average rent of $2,849 falls short of this benchmark by a third. This is also why many investors in high-priced coastal cities like Torrance expect long-term capital appreciation over cash flow. Vacancy loss must also be considered. When accounting for a month or so of vacancy during tenant turnover, the annual total rent would decrease to around $31,339, and the cap rate could drop slightly further. While some areas like North Torrance have seen a recent 3 percent increase, others have been more stable, so it is advisable to check recent transaction cases in the areas of interest before purchasing.

From a total return perspective, it is worth considering the recent 3 percent increase in property value and the asset growth from loan principal repayment. If the area is preferred by Korean families, please verify the GreatSchools ratings and school boundaries before purchasing. Comparing loan terms is also necessary. Even a 1 percentage point difference in interest rates can significantly affect cash-on-cash returns, so it is essential to calculate under the same interest rate assumptions for a fair comparison.

This article is not investment or legal advice, and it is recommended to consult with a professional before making any actual contracts.