A client nearing retirement recently visited the office to ask how much they could make each month if they rented out their home in Centerville instead of selling it. Many people are increasingly considering rental income as a part of their retirement funds, feeling uneasy relying solely on pensions and savings.

The median home price in Centerville is approximately $617,205 as of August 2026, and the average monthly rent is around $2,700 (Houzeo, Zumper). This translates to an annual rental income of $32,400, resulting in a total return rate of 5.25% when divided by the purchase price. While this may seem like a decent figure at first glance, it does not account for taxes or management fees.

To determine the actual cash flow, we need to calculate the net operating income (NOI). The property tax rate for Fairfax County, where Centerville is located, is $1.1225 per $100 of assessed value for the 2026 fiscal year, with an effective tax rate of about 1.01%. The median annual tax bill amounts to $7,669. When you add insurance, maintenance costs (typically about 1% of property value), and vacancy losses, operating expenses can often account for nearly half of the total rental income - this is known as the 50% rule.

Applying this standard, the net operating income would be about $16,200 annually, and the cap rate would drop to 2.62%. The difference between the total return rate of 5.25% and the cap rate of 2.62% indicates that nearly half of the income is lost to taxes and management fees.

If the property is purchased with cash for retirement funds, the cash-on-cash return will be nearly the same as the cap rate, as there is no leverage effect when buying outright. Conversely, if a loan is involved, the moment interest costs exceed the net operating income, the cash-on-cash return could fall below the cap rate.

Clients seeking stable cash flow in retirement should first consider whether a cap rate in the 2% range is sufficient. Centerville has been home to many Korean families for a long time, and there are several highly-rated areas within the Fairfax County Public Schools district, leading to steady rental demand. However, school district boundaries change frequently, so it's advisable to verify the assigned school for a specific address before purchasing.

When compared to the 1% rule, the gap becomes even more pronounced. 1% of the purchase price is $6,172 per month, while the actual rent is $2,700, which is only 0.44% of the purchase price. According to the rule of thumb that rental income should exceed 1% of the purchase price for positive cash flow, Centerville appears to be more of a market for capital appreciation than for cash flow.

For those considering relocating after retirement from another state, it's important to pay closer attention to property tax burdens. While states with no income tax may have higher property tax rates, newcomers from such states may find Virginia's effective rate of around 1% to be low, but the high home prices mean that the median tax bill is still $7,669. Judging solely by the tax rate can lead to underestimating the actual burden.

Centerville is located within the Washington D.C. commuting area and has maintained steady demand for a long time. Even if the cap rate remains in the 2% range, considering long-term ownership, decreasing loan principal, and rising property values can change the outlook for retirement funds. However, this can vary significantly based on the market conditions and interest rates at the time of purchase.

If moving from a state with relatively low property tax rates, the situation may feel different. Instead of comparing just the tax rates, it's more accurate to compare the total annual tax amount by multiplying the tax rate by the actual home price. Calculating how much of the rental income will be deducted each month can provide a clearer understanding.

Rather than designing retirement funds solely based on rental income, it's essential to consider total returns, including capital appreciation and asset growth from loan principal repayment. This article does not constitute investment or legal advice, and it is recommended to consult real estate and accounting professionals before making any contracts.