On a typical California rental, a single-family home near $650,000 renting for about $2,850, the numbers produce a 3.2% cap rate after California's 0.71% property tax, insurance, vacancy, and upkeep. That is $21,098 a year of net operating income before any mortgage. The tool below is preloaded with that rental; every return measure updates as you change it.
California rental returns at a glance
| Example rental price85% of the statewide median value | $650,000 |
|---|---|
| Example rent1.35× the $2,104 statewide median | $2,850 |
| Gross rent multiplierPrice ÷ a year's rent | 19.0 |
| 1% ruleMisses: rent is under 1% of price | 0.44% |
| Effective property tax rateTakes about 0.71% straight off the cap rate | 0.71% |
| Expense ratioOperating costs ÷ gross income | 38% |
Home values: Zillow, September 2026. Income, rent, and property tax: U.S. Census Bureau ACS, 2024. Insurance is an estimate. Sources · How every state compares
A California rental, every return measure
| Gross rent, yearly | $34,200 |
|---|---|
| Operating costs, yearlyTaxes, insurance, 5% vacancy, 8% maintenance, 8% management | $13,102 |
| Net operating income | $21,098 |
| Cap rateHeadline result | 3.2% |
| Cash invested (25% down, closing, repairs) | $188,750 |
| Mortgage at 6.875%Per month | $3,203 |
| Cash flowPer month | -$1,444 |
| Cash-on-cash returnHeadline result | -9.2% |
| Year-one total returnWith principal paydown and appreciation | 3.8% |
| All-cash cash-on-cash | 3.1% |
California costs behind the cap rate
Property taxes come straight off the cap rate
When taxes are assessed near the purchase price, the effective tax rate subtracts almost one for one from the cap rate: California's 0.71% costs the example rental about 0.71% of yield. Proposition 13 caps assessed-value growth at 2% per year and reassesses the property at market value on transfer — a long-held rental often pays a fraction of what a new owner pays.
Insurance in California
Budget about $1,300 a year for a landlord policy. Wildfire and earthquake exposure shape Western insurance: standard policies exclude earthquake damage, and homes in high-fire zones increasingly face non-renewals or FAIR Plan backstop coverage.
Landlord rules in California
AB 1482 caps annual rent increases at 5% plus local CPI (or 10%, whichever is lower) for most buildings over 15 years old; Los Angeles, San Francisco, and Oakland add stricter local rules. Rules on deposits, notice, and rent increases shape vacancy and turnover cost, two of the softest numbers in any NOI.
How to analyze a California rental
- Enter the asking price and the cash you'll need at closing and for repairs before the first tenant.
- Set rent from comparable California leases for the same bed and bath count within a mile, signed in the last few months.
- Replace the statewide 0.71% tax rate with the parcel's actual bill; watch for reassessment after a sale.
- Keep maintenance and management in the budget even if you self-manage; your time and the next roof are real costs.
- Read cap rate for the property, cash-on-cash for your deal, and use the price table to set an offer at your target cap rate.
Methodology
Net operating income is rent and other income, less vacancy and every operating cost, before the mortgage. Cap rate divides annual NOI by the price. Cash-on-cash divides cash flow after the mortgage by cash invested; total return adds year-one principal paydown and appreciation to cash flow over the same cash.
California prices, rents, and tax rates start from sourced statewide data (listed under Sources), scaled to a typical single-family rental; insurance is an estimate. Cap rates vary widely between neighborhoods; compare against recent sales of similar rentals nearby.
Sources
- Typical home value: Zillow Home Value Index (all homes, mid tier, seasonally adjusted), September 2026.
- Median household income: U.S. Census Bureau, American Community Survey 1-year estimates, table B19013, 2024.
- Median gross rent: U.S. Census Bureau, American Community Survey 1-year estimates, table B25064, 2024.
- Effective property tax rate: Median real estate taxes paid (B25103) ÷ median home value (B25077), Census ACS 1-year, the Tax Foundation's method, 2024.
- Homeowners insurance: Keystone estimate of a typical annual premium. Replace it with a quote for the address, 2026.
Read the full methodology, worked example, and caveats in the national Cap Rate & Rental ROI Calculator guide.
California FAQ
- What is a good cap rate in California?
- There is no single figure, but the typical California single-family rental in this example earns 3.2%. Prime neighborhoods trade lower, higher-risk ones higher. The useful test is the spread over your mortgage rate: at 6.875%, this rental's cap rate is below it, so financing dilutes the cash return.
- How do California property taxes affect cap rate?
- Almost one for one. Taxes are an operating expense, and when they are assessed near the price, the effective rate comes straight off the cap rate. California's 0.71% costs about 0.71% of yield; that is close to the national middle.
- Does the 1% rule work in California?
- The example rental rents for 0.44% of its price each month, short of the 1% screen. Few US markets meet it at today's prices, so use it to sort listings and the full NOI to decide.
- How much does a rental property make in California?
- On the example numbers, about $21,098 a year before the mortgage and -$17,332 after it with 25% down, a -9.2% cash-on-cash return. Adding principal paydown and 3% appreciation brings the year-one total return to 3.8%.
Other state editions
Every state gets its own edition of the Cap Rate & Rental ROI Calculator, preloaded with that market's typical values, tax rates, and insurance costs: