When to apply the 50% Rule
While reading the Ultimate Beginners Guide I was introduced to the 50% Rule and the 70% Rule, and the 1% Rule I have heard was bumped up to 2%. I like the 70% Rule as a good guide to make sure you are getting a good deal, but when I crunched the numbers on the property I currently live in, using the 50% Rule I found I would actually have negative cash flow.
Ideally I would rent the property for $1,400/month, my mortgage comes to roughly $830/month which includes the taxes and insurance in escrow, bringing my operating costs to $1,530/month.
I undertand the 50% Rule is there to cover vacancies and repairs, but just about everything in the property is new from the roof to the central air, and I don't foresee any major repairs for the foreseeable future. And as I stated, the taxes and insurance are escrowed in the mortgage. Would I be correct in assuming I could knock the 50% down to say, 20%, to net a positive cash flow of $600/month?