I have seen data calculating profit margins without including management fees. They calculated the cap rate using only property taxes, omitting other costs, resulting in a figure that was much higher than the actual numbers. To summarize, operating costs should include not only property taxes but also insurance, management fees, maintenance costs, and vacancy losses.

According to RentHop, the average rent in Brooklyn in July 2026 is $3,828, while the median sale price during the same period is around $1.1 million. Since the sale price exceeds $1 million, starting with the total profit calculation, the annual rental income of $45,936 divided by $1.1 million gives a cap rate of 4.2%.

The next step is to consider operating costs. Many properties in Brooklyn are in the form of condos or co-ops, which fall under New York City's property tax Class 2, with a tax rate of 12.439% for the 2026 fiscal year. Class 2 has a different assessment method than Class 1, so the actual tax bills can vary significantly from property to property. Therefore, it is most accurate to check the tax details of the properties of interest directly. Additionally, management fees must be added; Brooklyn condos often have separate monthly management fees resembling HOA fees, and omitting this item can inflate the cap rate. Including property taxes, insurance, HOA fees, maintenance costs, and vacancy losses, if we estimate using the 50% rule, the net operating income would be around $22,968 annually, resulting in a cap rate of approximately 2.1%.

Next, we need to check the cash-on-cash return when a loan is involved. This metric calculates the pre-tax cash flow relative to the actual cash invested, and in high-priced Brooklyn, the down payment itself is substantial, so it is common for the cash-on-cash return to be lower than the cap rate.

Even within Brooklyn, the rental demand and sale price can vary significantly depending on the neighborhood. If Korean families prioritize school districts, they should refer to ratings from GreatSchools or Niche, but since school district boundaries change frequently, it is advisable to verify the assigned school for the specific address before purchasing.

For those moving from other states, the HOA fees and property tax class structure may be unfamiliar, so it is essential to carefully review the management fee details for each property.

Let's briefly check the 1% rule. 1% of $1.1 million is $11,000, but the actual rent of $3,828 falls far short of this benchmark. In areas like Brooklyn, where sale prices are already high, it is practically difficult to find properties that meet the 1% rule.

Does this mean such properties have no investment value? The answer is closer to no. Even if the cap rate and cash-on-cash return are low, one must consider the total return over the long term, including asset appreciation from loan principal repayment and capital gains. Brooklyn is considered a region with steady demand, but it cannot be definitively stated that prices will always rise, so risks must also be acknowledged.

One more point to note is that the reserve fund status varies by building for Brooklyn condos, leading to significant differences in HOA fee increases. When comparing properties, it is advisable to check the history of HOA fee increases over the past few years.

When comparing properties, the first step is to determine whether they fall under Class 1 or Class 2. Even with the same sale price, the cap rate can differ based on the property tax class.

When comparing areas like Brooklyn Heights, which have high school district ratings, with relatively lower-priced areas, the differences in vacancy rates and rental stability often feel more significant than the cap rate differences.

Brooklyn has high sale prices, leading to a substantial initial investment burden, but it is also known that the downside risk for rents is relatively low. Balancing the initial investment and long-term stability can be crucial.

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