Many people often confuse net cash flow with mortgage payments. Simply put, mortgage principal and interest are the payments made to repay the loan, while net cash flow is the money left over after all those payments are made. When consulting in Albuquerque, many assume that everything left after deducting the mortgage from the rent is pure profit, but it's easy to overlook that property taxes, insurance, and maintenance costs are also deducted.

According to Redfin, the recent median sale price in Albuquerque is around $360,000, and based on Steadily's data, the average rent is about $1,405. Using these numbers to calculate the total yield, we find that the annual rental income of $16,860 divided by the purchase price of $360,000 results in a yield of 4.7%. Compared to the national average, Albuquerque is a market where both rent and home prices are relatively low, so this total yield may not seem bad.

However, when we move to cap rate, the story changes. The property tax in Bernalillo County for 2025 is known to have an effective tax rate based on market value of approximately 1.2% to 1.5%, which is significantly lower than some areas in New Jersey or New York. For a property priced at $360,000, property taxes can be estimated to be around $4,300 to $5,400 annually. If we estimate operating costs, including insurance, maintenance, and vacancy losses, using the 50% rule, the net operating income would be around $8,400, resulting in a cap rate of about 2.3%.

Looking at just the cap rate, it appears much lower than the previously calculated total yield of 4.7%, but it's important to understand that this is the real number after expenses. When calculating cash-on-cash return with a 20% down payment, we divide the net cash flow, excluding mortgage principal and interest, by the actual cash invested, resulting in a different figure than the cap rate. Depending on interest rates, cash-on-cash return can be higher or lower than the cap rate.

Within Albuquerque, comparing areas like Northeast Heights, which have high school district ratings, to those that do not reveals differences in rental demand and vacancy rates. If Korean families prioritize school districts, they should refer to ratings from GreatSchools or Niche, but since school district boundaries change frequently, it's advisable to check the assigned school for the specific address before purchasing.

Applying the 1% rule, 1% of the purchase price of $360,000 is $3,600, but the actual rent is around $1,405, which falls short of this benchmark. In simpler terms, while Albuquerque has low rents, it also has low sale prices, so the total yield itself isn't bad, but according to absolute standards like the 1% rule, it indicates a slightly lacking market.

Comparing the two areas side by side makes it easier to understand: areas with good school districts, like Northeast Heights, tend to have higher sale prices but lower vacancy rates and are easier to find long-term tenants, while relatively cheaper areas may show higher total yields but could face greater vacancy losses or management burdens. To truly see the differences between the two options, one must consider total returns that include loan principal repayment and capital gains, in addition to cap rate and cash-on-cash return.

Insurance is also one of the items that can be easily overlooked. In New Mexico, if the area has a history of wildfires or hail damage, insurance premiums may be higher than expected, so it's helpful to obtain insurance quotes when reviewing properties. In simpler terms, just because property taxes are low doesn't mean that overall operating costs are low.

When making a final comparison between the two properties, the differences in cap rate and cash-on-cash return are often more reflective of actual experience than the total yield difference. Organizing these three metrics side by side in a table before purchasing can help reduce confusion.

The figures discussed in this article are not investment or legal advice, and it is recommended to verify with an accountant or real estate professional before making any actual contracts.