The most common mistake made by those reviewing rental properties for the first time is not distinguishing between total return and net return. Based on my experience calculating with someone looking for their first investment property in San Antonio, I will outline how the actual numbers break down in this city.

Looking at the rental market in San Antonio, the average rent as of August 2026 is around $1,600 (Zillow Rental Manager). At the same time, the median home sale price is $299,990, which has slightly increased from a year ago (houzeo.com, as of July 2026). Property taxes in Bexar County have an effective tax rate of around 1.73%, meaning that for a home priced around $290,000, you can expect to pay about $4,500 in taxes annually.

The total return, calculated by dividing the annual rental income of $19,200 by the purchase price, is 6.40%. Investors typically respond positively to this number, but it's important to note that no expenses have been deducted from it.

If we apply the 50% rule and consider operating expenses to be half of the rental income, the net operating income becomes $9,600 annually, and the cap rate drops to 3.20%. This figure reflects all expenses, including property taxes, insurance, maintenance costs, and vacancy losses, making it different in nature from the total return. This is considered a reasonable cap rate among Texas metropolitan areas.

If financing is involved, a different calculation is necessary. Assuming a 25% down payment and closing costs, the actual investment amount would be around $84,000, and if the remainder is borrowed at an interest rate in the 7% range, the annual repayment exceeds the net operating income, resulting in a negative cash-on-cash return. First-time investors often take on significant debt simply because the cap rate seems acceptable, but it's essential to check cash-on-cash returns to understand how much is left each month.

According to the 1% rule, a monthly rent of $1,600 is about 0.53% of the purchase price, which falls short of the benchmark. However, San Antonio has relatively stable cap rates compared to other Texas metropolitan areas, as it has lower rent levels relative to purchase prices. In neighborhoods with good school districts, the purchase prices tend to be higher, similar to other cities, so it's advisable for Korean families to check the assigned schools using ratings from GreatSchools or Niche.

The concept of total return is also something I want to emphasize to first-time investors. Just because cash-on-cash returns are negative doesn't mean that property is a poor choice. The principal portion of the monthly mortgage payment remains as an asset, and when combined with potential appreciation, the overall return structure could change in 5 or 10 years. However, since appreciation is not guaranteed, it's wise to calculate separately how much can be expected for cash flow and asset growth from the beginning.

San Antonio is considered a market with a relatively low barrier to entry among Texas metropolitan areas. However, just because the purchase price is low doesn't mean the risks are low, so it's essential to maintain a conservative approach to vacancy rates and management costs, regardless of the purchase price.

The person I calculated with ultimately chose to increase their down payment to improve cash-on-cash returns. They believed that maintaining a stable positive cash flow each month would allow for comfortable long-term holding. Conversely, if initial capital is limited, it may be worth considering properties with relatively high cap rates to reduce the proportion of debt. Regardless of the choice made, it's particularly important for first-time investors to develop the habit of recalculating whenever loan conditions or target holding periods change, rather than just doing the calculations once and stopping.

For first-time investors, it's safest to calculate total return, cap rate, and cash-on-cash return in that order, and to understand why the differences occur before making a decision. Property taxes and loan conditions can vary by county and personal circumstances, and this article does not constitute investment or legal advice. Please consult with a professional before finalizing any contracts.