Basic question about how to calculate 50% rule

[Karen M.]

Hi Everybody, when you run the 50% rule..... do you include tax payments in your equation? Right, I'm guessing that is a yes.... so 50% of your total rent income needs to cover principal, interest and taxes?

I was watching a video and thought I saw that property taxes were excluded for the 50% equation but I don't understand why or if that is the way investors do it.

Thanks!

[Jon Holdman]

No. The 50% includes taxe, insurance, vacancy, maintenance, capital, etc. From the remaining 50% you have to pay your P&I payment. That's all. Whatever is left (hopefully a meaningful amount) is your cash flow.