I have a question in regards to the 50% Rule

[Andrew P.]

First Post!

So i've been lurking around on the forums for awhile, and listening to the podcasts on and off for the last few month.  I have a question regarding the 50% rule.  

I am looking to buy my first investment home in January.  For my first home, i'd like to stay conservative and stick to a nice/decent area (move-in ready for the most part) and purchase a single-family home.  

In the areas I am looking at, a single-family home runs at around $150,000.  Rent usually tends to stay around $1300/$1400.  I've been crunching the numbers, and I haven't been able to generate a positive monthly cash flow with a 20% down payment.  I really would like to stick to a 20% down payment.  (I'm not comfortable dropping <$30k on my first investment property)

Example:

$142,000 home

Down Payment $28,400 (20%)

Rent $1395

Mortgage $734 (20% down with an online mortgage calculator)

$1395/2= $697

$697-$734= (-$37.00)/month

Is 50% towards expenses generally "high"?  Is rent too low for the price point on the house?  Should I go out of my comfort zone, and go into a lower income area (I don't want to do this for my first investment home), or am I doing the math completely wrong (lol)?

Any insight would be greatly appreciated!  

[Brent Coombs]

@Andrew P., most investors may be crossing their fingers that the 50% "rule" won't apply to THEIR investments, and yes, it is just a rule of thumb, and yes, no-one can know their ACTUAL exact expenses in advance, and yes, everyone wants positive cash flow in A-class neighborhoods, and yes, no-one intuitively wants to go outside their comfort zone and yes, er, what was the question again?...