Why is my bank balance decreasing even though I receive rent? I was asked this question by a Korean investor who owns rental properties in Duluth. The answer is simple: it's because the principal portion of the mortgage payment is calculated as an expense, not as income. This confusion happens more often than you might think.

According to RentCafe, the average rent in Duluth in March 2026 is $1,658 per month. Zumper reports a higher figure of $1,995 for the same month. The Zillow Home Value Index suggests that the average home value in Duluth is $447,344. When calculating the total return using these numbers, dividing the annual rental income of $19,896 by the purchase price gives a return of about 4.4 percent. Duluth has a higher purchase price compared to the Atlanta metro area, resulting in a lower total return figure.

Now, let's factor in operating costs. The effective property tax rate in Gwinnett County is about 0.98 percent. For a home valued at $447,344, the property tax alone would be around $4,384 annually. Adding insurance, management fees, maintenance costs, and vacancy losses, applying the 50 percent rule results in a net operating income of $9,948, which is half of the rental income, and the cap rate drops to about 2.2 percent. The cap rate does not include the mortgage principal and interest. This is the key point.

To calculate the cash flow remaining after paying the mortgage, you need to subtract the entire principal and interest from the NOI. While only the interest is considered an expense, the principal is still money that leaves your account in cash flow calculations. If you invest $90,000 for the down payment and closing costs, and after paying the principal and interest, you have a pre-tax cash flow of $900 annually, the cash-on-cash return is only 1 percent. This is lower than the cap rate of 2.2 percent. The higher the loan-to-value ratio, the more common this reversal becomes.

• Net Operating Income (NOI) = Total Income - Operating Expenses, excluding mortgage
• Pre-tax Cash Flow = NOI - Total Mortgage Principal and Interest
• Cash-on-Cash Return = Annual Pre-tax Cash Flow ÷ Actual Cash Invested x 100

According to the 1 percent rule, a home valued at $447,344 should generate a rent of $4,473 per month, but the average rent in Duluth, ranging from $1,658 to $1,995, is far from this standard. Given the high purchase price, a strategy relying on appreciation may be more appropriate. The Duluth school district, which attracts many Korean families, has a high rating on GreatSchools, indicating steady rental demand; however, school district boundaries change frequently, so it's advisable to verify the assigned school before signing a lease. If you are coming from another state and do not distinguish between principal and interest when calculating, you may end up with a significantly different cash flow than expected.

Just because the cash flow appears low does not mean the property itself is bad. Each month, the principal portion of the mortgage is not an expense but rather an asset being built. When you add in appreciation and tax benefits from depreciation, the total return can be much better than a cash-on-cash return of 1 percent. Duluth, being a densely populated area with a significant Korean community, has a steady demand for rentals due to the development of commercial areas and educational institutions. However, given the high purchase price, if you only look at cash flow, the initial years may not be satisfying. If you have the financial capacity, consider lowering the loan-to-value ratio to improve your cash-on-cash return. While increasing the down payment may make the cash-on-cash return appear lower, the monthly cash flow can often become more generous. Duluth is a region with good school districts and amenities, attracting inquiries from Korean families relocating from other states, but the approach should differ based on whether the purchase is for personal residence or rental investment.

When calculating rental income, it's important to separate cap rate and cash flow. The cap rate reflects profitability without loans, while cash flow shows the actual bank situation with loans included. Mixing the two can lead to confusion. This article is not investment or legal advice, and it is recommended to consult with a professional before finalizing any contracts.