The first time I directly reviewed the profitability of a rental property was for a two-bedroom unit in Queens Village. To start with the numbers, as of 2026, the median home price in this area is around $785,000 (Redfin), and the rent for a two-bedroom is about $1,922 per month (RentCafe). The implications of these two figures are not straightforward; we need to first calculate how much profit can be generated from renting in an area where the purchase price is not low.

The annual rental income is calculated by multiplying $1,922 by 12, resulting in $23,064. Dividing this by the purchase price of $785,000 gives a total return rate of about 2.9 percent. While this number may seem low at first glance, it is important to note that the total return rate does not reflect any costs. A favorable aspect is that Queens has a relatively low effective property tax rate of 0.88 percent among New York City boroughs (StreetEasy), while an unfavorable aspect is that the purchase price itself is quite high compared to the rent, leading to a burdensome rent-to-price ratio.

Calculating just the property tax results in an annual cost of $6,908, which is just under 30 percent of the annual rental income. When adding insurance, maintenance costs, and vacancy losses, and estimating the net operating income using the 50 percent rule, it comes out to around $11,500 annually, bringing the cap rate down to about 1.5 percent. Applying the 1 percent rule, which suggests that a monthly rent should be at least 1 percent of the purchase price for positive cash flow, indicates that this property in Queens Village falls slightly short of that benchmark.

However, it is difficult to make a definitive investment decision based solely on these numbers. Even in areas with low cap rates, when considering potential appreciation or asset growth from loan principal repayment, the overall profit picture can change. Conversely, properties with high cap rates may yield lower actual profits if they experience frequent vacancies or higher-than-expected maintenance costs. To calculate the cash-on-cash return, one must consider the actual cash invested for the down payment and closing costs, and then divide the pre-tax cash flow remaining after loan repayment by that amount.

Rules of thumb like the 1 percent rule or cap rate are useful for getting a sense of direction when making initial calculations, but they are not absolute criteria for deciding whether to purchase. A positive aspect is that Queens Village has good public transportation access, leading to steady rental demand, while a downside is that this also means more competition for purchases, making it difficult for prices to drop. Considering both sides, it seems more balanced to weigh the low cap rate against the potential for price appreciation rather than simply labeling it a bad property.

When I first reviewed this property, I also compared it with studio and one-bedroom units. The rent for a studio is $1,426 per month, and for a one-bedroom, it is around $1,500, which is lower than the two-bedroom. However, when looking at the rent-to-price ratio, smaller units sometimes show a lower total return rate. This is because smaller units tend to have a relatively limited increase in rent compared to their purchase price, so it is more accurate to calculate and compare the total return rate and cap rate for each unit rather than making assumptions based solely on unit size.

In summary, the order of checks should be as follows:

• Get a rough picture by dividing annual rental income by the purchase price for total return rate
• Calculate cap rate using net operating income after deducting property tax and operating costs
• Check cash-on-cash return against actual cash invested when using loans

Property tax rates and rental prices can vary based on the exact location and type of building, so be sure to verify the latest data when reviewing actual properties. It is difficult to make definitive predictions about market prices, so comparing the cap rates of multiple properties can be helpful. This article is not investment advice, and it is advisable to consult with a real estate professional and an accountant before finalizing any contracts.