There are three main items to check in order: rental income, operating expenses, and cash flow compared to actual investment. Recently, I encountered a property calculation where the management fee was completely omitted, which significantly altered the yield numbers.

According to Zillow's rental manager, the median rent in Tenafly is projected to be $5,000 by April 2026, which is 138% higher than the national median. Based on the same data, the Zillow Home Value Index (ZHVI) reports the median home value at $896,668, and the median sale price according to Redfin has risen to $1.7 million, likely due to high-end properties in East Hill pulling the average up. In downtown or West Hill, properties can still be found in the $900,000 range.

For example, if we assume a purchase price of $900,000 with a monthly rent of $5,000, the total yield would be calculated as $60,000 annually divided by $900,000, resulting in a yield of 6.7%. The second item to check in order is operating expenses, where it is easy to overlook management fees. Just looking at property taxes, the average effective tax rate in Bergen County is around 2.4%, which could amount to about $21,600 annually. Adding in homeowners insurance, maintenance costs (approximately 1% of property value, or $9,000), and management fees (8% to 12% of rent, or $4,800 to $7,200 annually), along with vacancy losses, could push total operating expenses well over half of total income. If management fees are excluded from calculations, the net operating income will be inflated, and the cap rate will appear higher than it actually is.

The third item to check is the cash-on-cash return. This metric divides pre-tax cash flow by the actual cash invested, including down payment and closing costs. When a mortgage is involved, the cash-on-cash return often differs from the cap rate. When mortgage rates are high, cash-on-cash returns tend to be lower than cap rates because the burden of principal and interest payments suppresses net cash flow.

It is also worth noting that within Tenafly, the preferences of Korean families can vary depending on which school district they are assigned to. You can refer to ratings from GreatSchools or Niche, but since school district boundaries change frequently, it's advisable to check the assigned school for the specific address before purchasing.

If you are moving from another state, it's common to misjudge property tax burdens based on your previous residence. New Jersey has varying tax rates by county and town, so it's important to verify the actual tax bill for the properties of interest.

Using the 1% rule, 1% of a purchase price of $900,000 is $9,000, but the actual rent is $5,000, which is only half of that. In high-priced neighborhoods like Tenafly, it is often difficult to find properties that meet the 1% rule, but that does not mean they lack investment value. Factors such as school districts and neighborhood stability also play a role that cannot be explained by rent yield alone.

Even with the same budget, high-end properties in East Hill and those in downtown or West Hill attract different rental demand. East Hill primarily has large single-family homes with high long-term residency demand, while downtown offers relatively better accessibility and faster rental turnover. Rather than judging solely by cap rates or cash-on-cash returns, it may be beneficial to consider total returns by factoring in asset appreciation due to principal repayment and increases in sale prices.

Operating expenses can be categorized into five main areas.

• Property taxes - average effective tax rate in Bergen County around 2.4%
• Homeowners insurance
• Maintenance costs - about 1% of property value
• Management fees - 8% to 12% of rent
• Vacancy losses

If any of these five items are omitted, the cap rate will appear higher than it actually is, so it may be helpful to create a table that includes all five items when comparing properties.

The calculations discussed in this article are not investment or legal advice, and it is recommended to verify specific numbers with an accountant or real estate professional before making any contracts.