Yield Analysis
Most condo-as-rental content stops at gross yield. Net yield after HOA, property tax, insurance, vacancy, and management tells a different story. Here is the honest math for 10 US metros.
Before any expenses. Almost meaningless for condos.
NOI = rent minus HOA, tax, insurance, vacancy, maintenance.
Same as net yield but excludes financing. Used for comparison.
Most relevant for leveraged investors.
Net yield calculation: gross rent minus HOA, then apply 1.2% property tax, $700 insurance, 5% vacancy, 1% maintenance, 8% management. “1% Rule Hit” means monthly rent is at least 1% of purchase price after HOA deduction. Data: Realtor.com, Zillow, Rentometer, CAI HOA averages Q1 2026.
| Metro | Median Price | Median Rent | HOA/mo | Gross Yield | Net Yield | 1% Rule |
|---|---|---|---|---|---|---|
| NYC | $850K | $3,800 | $1,200 | 5.4% | 1.8% | No |
| San Francisco | $750K | $3,500 | $900 | 5.6% | 2.3% | No |
| Los Angeles | $550K | $3,200 | $600 | 7.0% | 3.5% | No |
| Miami | $480K | $2,900 | $800 | 7.3% | 2.9% | No |
| Washington DC | $420K | $2,600 | $500 | 7.4% | 3.8% | No |
| Chicago | $280K | $2,100 | $400 | 9.0% | 5.1% | Marginal |
| Atlanta | $260K | $1,900 | $300 | 8.8% | 5.3% | Marginal |
| Indianapolis | $200K | $1,700 | $200 | 10.2% | 6.8% | Yes |
| Phoenix | $320K | $2,200 | $350 | 8.3% | 4.6% | No |
| Denver | $360K | $2,300 | $450 | 7.7% | 3.9% | No |
Every yield calculation above assumes no special assessment during the hold period. That assumption deserves scrutiny. Major US building disasters have highlighted how quickly deferred maintenance becomes a catastrophic assessment:
The 2021 Surfside condominium collapse in Miami Beach killed 98 people and triggered a wave of Florida legislative reforms. Under SB-4D and HB-1029 (2022), Florida now requires all condo buildings taller than three stories to conduct milestone structural inspections and maintain fully funded reserves by the end of 2024. The result: buildings across Florida face assessments of $5,000-$80,000 per unit for deferred structural work. Miami Beach alone has seen multiple buildings assess $20,000-$50,000 per unit.
Florida is the test case for what other coastal and aging-building markets face. Before purchasing any condo as a rental investment, verify the reserve fund status and request any engineering or inspection reports from the last 3 years.
| Factor | Condo | Single-Family Home |
|---|---|---|
| Net yield (typical major metro) | 2-4% | 4-7% |
| HOA impact | Significant; 15-30% of gross rent | None in most cases |
| Financing (investor, 25% down) | Often non-warrantable; higher rate | Standard investor rates |
| Exit buyer pool | Restricted if non-warrantable | Broad; all buyer types |
| Appreciation driver | Building + location; limited land | Land value is primary driver |
| Maintenance responsibility | Interior only; exterior via HOA | Everything; higher time commitment |
| Special assessment risk | Real; major financial risk | None (you control repairs) |
| Urban core availability | Wide selection in dense cities | Limited or unavailable |
The condo investment case is strongest in: dense urban cores where SFH does not exist, ultra-low-HOA secondary markets, and resort-area STR markets where HOA bylaws and local ordinances permit short-term rentals. In the majority of suburban and urban condo markets in 2026, single-family rentals outperform condos on cash flow, exit liquidity, and appreciation.
A cap rate (net operating income / purchase price) of 5-7% is generally considered acceptable for real estate investment. For condos specifically, achieving a 5%+ cap rate after HOA, property tax, insurance, and vacancy is difficult in most major US metros in 2026. Secondary markets like Indianapolis, Columbus, and certain Midwest cities can hit this threshold. High-HOA markets like Miami, NYC, and San Francisco typically deliver cap rates of 2-4% -- which is below the risk-free rate on Treasury securities.
A Debt Service Coverage Ratio (DSCR) loan is a mortgage product for investment properties that qualifies based on rental income rather than the borrower's personal income. Lenders calculate DSCR as net operating income divided by annual debt service. A ratio of 1.0 means rent exactly covers the mortgage; lenders prefer 1.25 or above. For condos specifically, HOA fees are deducted from rental income before calculating DSCR, which means HOA fees directly reduce how much you can borrow. DSCR loans typically require 20-25% down and carry interest rates 1-2% above primary residence rates.
A special assessment is a one-time charge from the HOA to fund major repairs not covered by reserves. Amounts vary from $2,000 to $50,000 or more per unit. A single $20,000 assessment on a condo earning $500 per month net cash flow wipes out 40 months of profit. Over a 10-year hold, even one major assessment significantly degrades the IRR. The only way to account for this is to build an assessment reserve into your underwriting or to specifically verify that the building's reserve fund is well-funded (70%+ of required level) before buying.
Single-family homes outperform condos as long-term rental investments for five reasons: no HOA fee eating cash flow, no rental percentage caps limiting the buyer pool at exit, land value as the primary appreciation engine (condos have minimal land allocation), no financing restrictions at exit (no HOA approval, FHA approval, or owner-occupancy ratio concerns), and lower investor down payment requirements (primary residence SFH can be bought with 3.5-5% down vs 25% investor condo in many cases). The tradeoff: SFH requires more maintenance management time and typically higher per-unit entry price in dense urban markets.
Sources: Realtor.com, Zillow, Rentometer condo median data Q1 2026; CAI HOA fee averages; ATTOM yield data 2025; John Burns Real Estate Consulting SFH rental returns; Florida SB-4D (2022) and HB-1059 reform requirements. Last verified April 2026.