Am I Overestimating Rental Expenses, or Is Cash Flow Really This Difficult in Today's

Specialist · Ashburn, VA · Member since 2026 · 35 posts · 9 votes

I think your approach is sensible, especially because you’re accounting for expenses and reserves before buying rather than relying on gross rent figures. I wouldn’t say you’re necessarily overestimating; the bigger issue may be the purchase price and refinance loan balance compared with the rental income.

One thing I’d review is whether you’re separating routine maintenance from capital expenditure reserves and avoiding any double-counting. Your assumptions are conservative, but it’s better to be realistic than underestimate expenses.

At $3,200 in monthly rent, a $380,000 loan at 7.5% leaves very little room once debt service, taxes, insurance, management, vacancy and repairs are included. Reducing the refinance balance is likely to make a much bigger difference than cutting reasonable operating reserves.

I would also stress-test the numbers using actual local rent comps, property taxes, insurance quotes and realistic repair costs. Your $300–$500 cash-flow target isn’t unreasonable, but it may require a much lower acquisition price, a larger equity position, or a property with stronger rental income.

It’s good that you’re doing this analysis before purchasing. The goal isn’t just to find a deal that looks profitable on paper, but one that still works after the unexpected expenses come along.

I’m also involved in real-estate networking and enjoy connecting investors with helpful industry contacts. Always happy to exchange connections if you find yourself looking for local professionals as you get started.

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Eric S.
OP
Ambler, PA · Member since 2017 · 26 posts · 10 votes
1d
Hey,
Thank you very much for the help and suggestions on this. I am still early in my real-estate investing journey. i have 50k to put on my first property but want to wait till i feel like i know the industry better before purchasing anything. Once I am closer to that point I will be sure to reach out to you.
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Chris ColtonPro Member

Investor · San Antonio, TX · Member since 2026 · 142 posts · 62 votes

1d

Eric, your calculator isn't the problem. I hit the same wall when I started — every deal looked negative once I put the real expenses in, and I kept thinking I was doing the math wrong.

The thing that finally clicked for me is the payment has to fit the rent before anything else matters. On that Lansdale duplex, the loan alone is over $2,600 a month on $3,200 of rent, before any of the rest of it. No amount of trimming the reserves fixes that. It's not a bad calculator — it's a property where the numbers don't work at a regular loan.

The ones that work for me are the ones where the payment was shaped to the rent from the start. Keep running them the way you are. Asking the question before you buy is the part most people skip.

210-756-9075

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Jimmy Samaha

Staten Island, NY · Member since 2013 · 146 posts · 73 votes

1d

Eric, I backed into your numbers and they're consistent. At 7.5% over 30 years a 380k loan is about 2,657 a month, so your calculator has roughly 1,955 a month in everything else, which is about 61% of the 3,200 rent. Your percentages only account for about 992 of that, so roughly 960 a month is taxes, insurance and landlord paid utilities. I'd pull the actual tax bill, get a real insurance quote and confirm which utilities the tenants pay on that duplex, because that line is either right or it's what is killing the deal.

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Devin PetersonBusiness Member

Lender · Sarasota, FL · Member since 2022 · 2k+ posts · 695 votes

1d

Eric, your formulas look fine to me. The problem in this example is the debt, not the expenses. At 7.5% on a 30-year, a $380k loan is about $2,657 a month in principal and interest alone, before taxes, insurance or any reserves, against $3,200 of rent. No expense tweak fixes that.

Your $200k run checks out too. That's roughly $1,400 in P&I, plus your 31% of rent for vacancy, repairs, management, turnover and CapEx (about $990), which leaves around $800 for taxes, insurance and utilities. In that part of PA, that gets eaten up fast.

A few things worth looking at:

On a BRRRR refi, most lenders cap the new loan around 70-75% of the appraised value, so a $380k balance assumes the duplex appraises somewhere around $510k-$540k after the rehab. If the plan is to refi near the purchase price, it's really a buy and hold with very high leverage.

Repairs at 8% and CapEx at 7% are separate buckets, so that's not double counting, but make sure your "other operating expenses" line isn't counting repairs or utilities a second time. If you self-manage at first the 10% drops off, though it's smart to leave it in and see if the deal still works with a manager.

If you refi with a DSCR loan, the lender is basically running the same test you are: rent divided by the full payment including taxes and insurance. Many want that ratio at 1.0 or higher, so a deal that's deeply negative will usually get its loan amount cut too.

For a first property, a duplex you live in (owner-occupied financing with a lower down payment) is a common way to make eastern PA numbers work, since the other unit's rent offsets your own housing cost.

Your expectations aren't crazy, but $300-$500 a month on a financed duplex at today's rates usually takes a bigger down payment, a value-add plan that pushes rents up, or a lower purchase price. Much better to find that out on a spreadsheet than after closing.

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Alex S.

Investor · Washington, US · Member since 2021 · 153 posts · 42 votes

1d

I wouldn't cut those budgets just to get positive cash flow. One thing I'd check first, though: are maintenance and reserves for big replacements counting any of the same stuff twice?

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Dan Duenas

Lender · Irvine, Orange County · Member since 2026 · 82 posts · 46 votes

1d

Eric — your formulas aren't wrong, and you're not really double-counting. Vacancy, repairs, PM, leasing, and capex are five separate buckets: repairs is the leaky faucet this month, capex is the roof and HVAC you'll need in five years. Your percentages are actually pretty standard. Scarlett's point is a good one — a house with a new roof and HVAC needs less in the capex bucket than one at end of life — but that's a tweak, not the problem.

The problem is the price-to-rent math on this deal. $379,900 asking against $3,200 a month in rent is a 0.84% rent-to-price ratio. Run the payment: on a $380K loan at 7.5% for 30 years, principal and interest alone is about $2,657 a month. Add taxes and insurance and you're underwater before a single operating expense shows up. Your own model is telling you the truth — even at a $200K loan balance it barely breaks even.

Here's the lender-side lens, since that's the part nobody's mentioned yet: on a refi, the underwriter looks at whether the rent covers the full payment — principal, interest, taxes, insurance. At $3,200 in rent, the loan this property supports is roughly $200K. That's not your calculator being pessimistic, that's the market telling you the price is the problem.

Two ways to look at it: either the price comes down toward where the rent actually supports the payment, or you move on to the next one. Don't buy negative cash flow hoping a future refi fixes it — that's how people end up subsidizing a tenant for years. Your $300–500 a month goal is realistic, just not on a $380K price with $3,200 in rent. Keep running numbers the same way — the discipline is right, this deal just isn't.

Happy to run your numbers if you want a second set of eyes — Dan

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Eric S.
OP
Ambler, PA · Member since 2017 · 26 posts · 10 votes
1d
Thank you very much for the in depth response. Being so new to this and looking at 30 properties. I figured either it’s a very tough investment market or my math was off. Seems like most on the market properties won’t cash flow so ide have to keep checking and look at other options like foreclosures or short sales.
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Nicholas L.Pro Member

Flipper/Rehabber · Pittsburgh · Member since 2018 · 6k+ posts · 5k+ votes

1d

@Eric S.

Hi Eric. Sounds like you're doing everything right. LTRs no longer cash flow at today's prices and rates. Capex can also vary widely - a house with a brand new roof and furnace is likely to have lower capex with ones that are at EOL.

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Eric S.
OP
Ambler, PA · Member since 2017 · 26 posts · 10 votes
1d
Ya seems like it’s dam near impossible to find anything within 100k of cash flowing. Thought I was just new and missing something
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Mark Cruse

Investor · Fort Washington, MD · Member since 2014 · 1k+ posts · 1k+ votes

1d

What is wrong? Your numbers.

You have to get the asset with the right numbers for the right price in order for it to work. You cant just take anything with any numbers, plug all that in and wonder whyit wont compute. The hardest part these days, depending on where you are, is getting something where the numbers do work.

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Leo Aftandelian

Member since 2026 · 3 posts · 0 votes

1d

I ran your numbers and your formulas look right. Both of your results are consistent with each other: at a $380k loan the payment at 7.5% is about $2,657, and at $200k it's about $1,398, and both of your cash flow figures work out to roughly $963 a month in taxes, insurance and utilities on top of your percentage line items.

The expenses aren't really the problem, though that $963 is the line I'd verify first: the actual tax bill, a real insurance quote, and whether tenants pay their own utilities. Your percentages total 31% of rent, and with the fixed costs you're at about 61% of rent before the mortgage. That's conservative but not unreasonable for an older duplex.

The real issue is the price. At $3,200 in rent your NOI comes to about $1,245 a month, or about $14,900 a year, which is a 3.9% cap rate at $379,900. When the property yields 3.9% and you're borrowing at 7.5%, every dollar of debt costs more than it earns, which is why cutting the loan to $200k still didn't get you positive.

To hit your target at 7.5%, the loan can't be more than about $135k for $300 a month, or about $107k for $500 a month. On this duplex that means leaving roughly $245k to $275k of your own money in the deal. For the cap rate to match your interest rate, the price would need to be closer to $200k at this rent.

One more thing on the BRRRR side: refinancing to a $380k loan at a typical 75% loan-to-value needs an appraisal around $507k after the rehab, so that assumption is worth checking against real comps.

So your calculator isn't wrong and your expectations aren't unrealistic. This property is priced for owner-occupants, not for rental income. In this rate environment you're looking for deals where the cap rate is at or above your mortgage rate, which usually means lower-priced properties or ones where the rent can genuinely be raised.
Full disclosure, I built a free calculator called Caprately because I kept running into exactly this negative-leverage problem, and it's what I used to check these numbers. Happy to share it if it's useful.

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David F.

Member since 2018 · 114 posts · 136 votes

1d

Your #s look pretty solid. I’d up vacancy to 8%, but that’s it.

Bottom line: single family homes don’t cashflow today with 20% down at retail purchase price. Anywhere. In my market, if I pay full retail for a B/C class rental house (typically $300k in my city), then I need 50% down (150k) to break even after all my expenses. No way I’m doing this!

If I am patient, and make a great buy at a 25% discount, then I still need 25% down (75k) + another 10k for loan costs, in order to breakeven. So basically 85k needed to secure a 300k asset. But the good news is, I also added 75k to my net worth. But I won’t be making any cash flow monthly. Just mortgage pay down, tax deductions, and appreciation.

Given this BRRR approach, which is a good approach for today's investors of single family homes, the play is equity, not cash flow. The 20% down and it cashflows days are over my friend. Those who aren't willing to accept this chase out of state C/D class 100k homes, and end up getting burned.

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Dan H.Pro Member

Investor · Poway, CA · Member since 2015 · 7k+ posts · 8k+ votes

21h

I think your numbers are optimistic, not pessimistic.

there are few markets at that rent point, assuming more than 1 BR, that have vacancy as low as 5%.
your maintenance/cap ex totals $240/month per unit. That is no t sufficient sustained allocation even if the duplex is brand new. I challenge anyone with a lifetime/cost itemized spreadsheet to show otherwise. Not some picked from air guesstimate. Not some shat you have paid so far after 15 years or less of ownership. The high expense items have expected lifetime in excess of 15 years.
Not sure what is included in landlord-paid other operating expenses but does it have bookkeeping/tax prep and asset protection (LLC, umbrella, etc)?

As others have stated RE investing has challenges at this time but a brrrr has a lot of advantages. You did not indicate what your rehab budget is so I will make an assumption.

$380k at 75% LTV implies an LTV of $506k of $126k of value added. If rehab and holding it s 50% of the value added then you have $60k of sweat equity. This $60k can be used to consume a lot of negative cash flow. As long as the negative cash flow does not consume all the sweat equity, you have minimized investment that will forever optimize ROI.

Note I am not saying this property is a good brrr candidate but I am implying that a brrrr with initial negative cash flow can work.

A while back (Dec 2021) I purchased the most negative cash flow non commercial property I have ever heard of. How bad could it be? How about a 0.28% fully occupied monthly rent ratio? Anyone hear of worse monthly rent ratio? I had another effort that I prioritized over this effort so it took 3 years to stabilize the property. It had positive cash flow before being fully stabilized but I am unsure how long it took to have any positive cash flow (likely happened between year 2 and year 3). Today it has value over $1m more than purchase and rehab cost. Using my what most would consider conservative cash flow projections after including expected vacancy and sustained expenses it has $5500/month positive cash flow (modest for its equity). Its value has increased over $10k/month over its hold.

Good luck

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Jimmy LieuBusiness Member

Real Estate Agent · Columbus, OH · Member since 2019 · 3k+ posts · 2k+ votes

10h

Eric, your calculator isn't the problem. Your sample duplex rents at about 0.84% of the asking price ($3,200 on $379,900), and with a 7.5% rate that ratio just can't carry the expense load you've listed. Cutting the price helps, but the cleaner lever is the rent-to-price ratio of the market you're buying in. Wide-open spreads like that are why plenty of Philly-area investors end up looking at other parts of the country for their cash flow properties.

Since you want $300-$500 a month after reserves, run the same spreadsheet on a few Midwest markets before you give up on the strategy. Columbus is one worth testing. A lot of the deals I see there hit the 1% rule and still cash flow after every expense, most with $20K-$30K of built-in equity at purchase, with single families mostly at $120K-$180K and multifamily starting around $200K. Plug real listings in and compare. The same conservative expense lines you're using are what make those numbers credible.

Happy to connect and compare notes.

[email protected]614-300-7535

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Henry Lazerow

Real Estate Agent · Chicago, IL · Member since 2017 · 2k+ posts · 2k+ votes

10h

Connect with a local agent and local investors to work out the exact variables for the analysis. For example in my market Chicago north side vacancy rate runs under 3% with close to 0 rent loss however in the suburbs or worse parts of city it can easily run 8% or even 10% plus after rent loss so your figure of 5% could actually be underestimating dependibg on location. Property management is only 10% in rough areas so you may be very wrong with that variable, here management fees are only 4% to 7% for example and most people just self manage until have large portfolios.

Regardless to cash flow, you need do cosmetic updates at a minimum and boost rents to top of market to make deals work it will likely be like that in all markets, get to know your target area ARV rents better then the competition.

Also a tip look for 3 or 4 units. They tend to cashflow much better then 2 units.

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Eric S.
OP
Ambler, PA · Member since 2017 · 26 posts · 10 votes
4h
Hey,
Thank you very much for the feedback and insight
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Marc MoraPro Member

Investor · Fort Lauderdale, FL · Member since 2026 · 277 posts · 45 votes

9h

@Eric S., your expense numbers are fine. Very little cash flows at asking price with a 7.5% loan, so I'd work out where your deals will come from before running another listing. We can swap notes on strategy with you if you'd like another set of eyes. Are you pulling everything off the MLS? Have you considered other strategies? There are many of them. I wouldn't mind helping!

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Eric S.
OP
Ambler, PA · Member since 2017 · 26 posts · 10 votes
4h
Hey,
I would love to connect with you on these. SO far i have only been pulling from sites like zillow and redfin. 1st so i get familiar with what's in my areas and 2nd so i get good at running the numbers.
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Arman AhmedPro Member

Real Estate Agent · Columbus Cleveland Dayton, OH · Member since 2024 · 2k+ posts · 974 votes

2h

Quote from @Eric S.:

Hey everyone,

I'm relatively new to real estate investing and have been putting together an Excel calculator to analyze potential rental properties, primarily using the BRRRR strategy.

I've based much of my calculator on Chapter 5 of Brandon Turner's The Book on Rental Property Investing, factoring in:

Vacancy: 5%
Routine repairs and maintenance: 8%
Property management: 10%
Leasing/turnover: 1%
Capital expenditure reserves: 7%
Property taxes and insurance
Landlord-paid utilities and other operating expenses
Mortgage payments based on a 30-year mortgage at 7.5%

For clarification, the loan balance I enter is what I expect to owe after refinancing, not necessarily the original purchase price.

What's surprising to me is that almost every property I analyze produces negative cash flow. Even when I run scenarios where I'm purchasing a property significantly below asking price, sometimes by $100,000–$200,000, and reduce my projected mortgage balance accordingly, the numbers still struggle to work.

Here is an actual property I'm using as an example in the attached calculator:

17 W 4th St, Lansdale, PA 19446

Asking price: $379,900
Property type: Duplex
Rental income per unit: $1,600 (previous rental income)
Total monthly rental income: $3,200
Assumed loan balance after refinancing: $380,000
Calculated monthly net cash flow: -$1,412
Calculated annual net cash flow: -$16,944

Even if I reduced the loan balance to $200,000, nearly $180,000 below the asking price, my calculator would still show a monthly loss of approximately $153.

My goal is to generate at least $300–$500 per month in net cash flow after accounting for all expenses and reserves.

I've attached my Excel calculator and would appreciate some feedback from experienced investors.

Is there anything wrong with my formulas or overall approach?
Am I overestimating certain expenses or potentially double-counting anything?
Are my expectations for monthly cash flow unrealistic?
Or is finding positive cash-flow properties simply this difficult in the current market?

I'm primarily looking at single-family and small multifamily properties in eastern Pennsylvania.

I'm trying to educate myself before purchasing my first investment property, so any constructive criticism or feedback would be appreciated. I'd rather find out now that I'm doing something wrong than after purchasing a property.

Thanks in advance!

Hey Eric, I don't think your expectations are unrealistic. You're smart to account for vacancy, maintenance, management, and capital expenses upfront. The challenge may be the market and purchase price rather than your calculator. I'd look beyond eastern PA as well. The Midwest has more affordable single-family and small multifamily opportunities that may offer better cash flow, especially if you're open to investing out of state with a reliable local team.

[email protected]614-418-6081

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Am I Overestimating Rental Expenses, or Is Cash Flow Really This Difficult in Today's

Am I Overestimating Rental Expenses, or Is Cash Flow Really This Difficult in Today's

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