Updated almost 9 years ago on . Most recent reply
50% Rule...help!
I am looking for clarification on the 50% rule. Right now I am looking at a 4-plex, the seller is asking 125,000 and the rents currently generate 1700 per month. According to the 50% rule, I split the 1700 in half, then the remaining (850) I would use to pay the mortgage, insurance, and taxes (~550) and what is left over is my cash flow (300). But why am I allotting the first 50% to expenses every month, if I am spending 850 month on this property or any property it doesn't sound like a sound investment. I understand allotting for those unexpected expenses but 850 a month sounds high for a property that is only cash flowing 300. Any help is extremely grateful!