Am I calculating these rental projections properly?

Question

Hello folks!

I'm getting into real estate investing, and I'm trying to 
understand whether renting is a viable strategy for where I'm targeting 
(Newark, NJ). I'm very numbers oriented, so I have this spreadsheet I've
 been creating:

https://docs.google.com/spreadsheets/d/1Stm6OkkDAsQ4crI4WoV0M26NYBCcSgkU88DuraiVj_A/edit?gid=0#gid=0

There's a lot of numbers here, so I can also talk through it:

• I'm looking to get multifamily rental properties, ideally with 3 
units. The price for that is usually around $500-$650k in Newark (!!). 
Estimated rental income for all 3 units is around $6400/mo.
• I'm using a mortgage program with 0% downpayment, so monthly 
mortgages are pretty high (~$4000/mo in the example in the spreadsheet, 
provided I haven't edited it since)
• I add a lot of costs on top of mortgage. The biggest ones are 
property management (I don't live in Newark), amortized maintenance and 
amortized capex. I also consider vacancy. All those come out to about 
$1800 per month.
• If I consider just the normal operating expenses, I do get a 
little cashflow overall (about $450 per month). However, if I consider 
that my rental income is taxed as normal income (less property 
management fees, interest in mortgage, etc), you can see that my numbers
 go into the negative (-450 per month). I am not considering maintenance
 and capex in my tax deduction calculations since they are infrequent 
and irregular (also good to have worse case scenario projections).

I'm looking to get multifamily rental properties, ideally with 3 
units. The price for that is usually around $500-$650k in Newark (!!). 
Estimated rental income for all 3 units is around $6400/mo.

I'm using a mortgage program with 0% downpayment, so monthly 
mortgages are pretty high (~$4000/mo in the example in the spreadsheet, 
provided I haven't edited it since)

I add a lot of costs on top of mortgage. The biggest ones are 
property management (I don't live in Newark), amortized maintenance and 
amortized capex. I also consider vacancy. All those come out to about 
$1800 per month.

If I consider just the normal operating expenses, I do get a 
little cashflow overall (about $450 per month). However, if I consider 
that my rental income is taxed as normal income (less property 
management fees, interest in mortgage, etc), you can see that my numbers
 go into the negative (-450 per month). I am not considering maintenance
 and capex in my tax deduction calculations since they are infrequent 
and irregular (also good to have worse case scenario projections).

I'm wondering if I'm missing something, because otherwise all the properties I can see on the MLS are pretty bad deals

I do understand that you have to search a lot before you find something good, but this has still shocked me a bit

Drew Sygit · Answer

Common rookie mistake - you're thinking you have pay asking price:(

Run your numbers backwards, starting with market rents, to come up with a purchase price.

That's the price you offer!

James Stout · Answer

You’re not missing anything — Newark is just a really tough market for cash flow right now. Between high purchase prices, taxes, and expenses, most properties won’t look great on paper, even with solid rents. A lot of people buying there are banking on appreciation or long-term rent growth, but if you’re after cash flow, you may need to look in other markets.

Shawn Mcenteer · Answer

Hi @Boberg Beckloff anything Newark, NJ I would account for extreme laws that favor tenants. Raising rents is very difficult and evicting is very difficult.

Typically I advise and teach clients how to systematically property manage to reduce that cost but being how Newark is with regulations it may be best to keep PM fee.  Good news is Vacancy tends to be low, I am under 1% on personal properties.  I think with Newark the turnover will be low as well becuase if tenants knows system, which most do, they can essentially live on property for many years without land lording legally being allowed to raise rents. Many tenants will get the rent the want and know it will not go up much if at all long term.

Luke Feliciano · Answer

Hello Boberg,

Whenever I run a DSCR loan, I always use this tool that's offered by HUD to determine what the market rent values in a given area might be. Here is a link to that: https://www.huduser.gov/portal/datasets/fmr/fmrs/FY2026_code...

Hope this helps!

P.S. I am a lender licensed in New Jersey and would be happy to answer any questions about buying and financing an investment property.

Arman Ahmed · Answer

@Boberg Beckloff

Hey Boberg, great work thinking through all the numbers — it looks like you’re being thorough with both operating expenses and taxes, which is key. One thing I see a lot with higher-priced markets like Newark is that cash flow can be really thin unless you find a deal significantly below market or add value through rehab. For a first multifamily, you might want to also model worst-case scenarios with higher vacancies or repairs, and compare potential returns in lower-cost Midwest markets, where the purchase price is often lower, rents are stable, and cash flow can be much stronger. That way, you can see a more realistic range of outcomes and make informed decisions before committing.

Boberg Beckloff · Answer

Thanks for mentioning that.

Honestly, I'm hearing consistently that NJ is hard to find deals in, and it definitely seems true from what I'm seeing. I might just consider focusing on the midwest.

Am I calculating these rental projections properly?

Most Popular Reply