Updated almost 10 years ago on . Most recent reply
Does the 50% rule exist in Massachusetts?
Is the 50% rule and the 2% rule/test even possible in Massachusetts?
Most Popular Reply
Where have you been looking? I haven't seen a 2% rule anywhere realistic and have been assuming that to be 1% ages now.
Just for giggles, I analyzed this
property
http://www.trulia.com/property/3229148553-1-Quimby...
rent
https://www.rentometer.com/results/tt_kOY8yPiI
Analysis
| Acquisition Cost Breakdown | |
| Purchase Price | $150,000 |
| Downpayment | $30,000 |
| Finance Amount | $120,000 |
| Improvements | $7,000 |
| Closing Costs | $4,500 |
| Total Cost | $161,500 |
| Cash Outlay | $41,500 |
| Financing Details | |
| Downpayment | 20.00% |
| Interest Rate % (anual) | 4.50% |
| Closing cost % | 3.00% |
| Loan Period (years) | 30 |
| Monthly Mortage Payments | $608 |
| Monthly | Annual | Monthly | Annual | |||
| Revenues | conservative | optimistic | ||||
| Gross Scheduled Income | 1,200 | $14,400 | $1,500 | $18,000 | ||
| Vacancy Rate (% Rent) | 10.00% | 120 | $1,440 | 8.30% | $125 | $1,494 |
| Net Scheduled Income | 1,080 | $12,960 | $1,376 | $16,506 | ||
| Other Income | 0 | $0 | $0 | $0 | ||
| Gross Operating Income | 1,080 | $12,960 | $1,376 | $16,506 | ||
| Operating Expenses | ||||||
| Propperty Taxes (annual) | $148 | $1,776 | $148 | $1,776 | ||
| Insurance (annual) | $37 | $444 | $37 | $444 | ||
| Property Mgmt (% Rent) | 10.00% | $120 | $1,440 | 8.00% | $120 | $1,440 |
| Repairs (annual) | 10.00% | $120 | $1,440 | 5.00% | $75 | $900 |
| CapEx (annual) | 5.00% | $60 | $720 | 2.50% | $38 | $450 |
| HOA (annual) | $0 | $0 | $0 | $0 | ||
| Utilities (annual) | $0 | $0 | $0 | $0 | ||
| Landscaping/snow (monthly) | $0 | $0 | $0 | $0 | ||
| Other 1 (annual) | $0 | $0 | $0 | $0 | ||
| Other 2 (monthly) | $0 | $0 | $0 | $0 | ||
| Total Operating Expenses | $485 | $5,820 | $418 | $5,010 |
| con | opt | ||
| 1% rule | 0.80% | 1.00% | |
| 50% rule | 44.91% | 30.35% | |
| NOI | $7,140 | $11,496 | |
| Cash Flow annual | -$156 | $4,200 | |
| Cash Flow monthly | -$13 | $350 | |
| Cap Rate | 5% | 8% | |
| CoC | 0% | 10% |
Not to say that I would touch this property as it doesn't cash flow with my conservative criteria, but both conservative and optimistic criteria are showing this falling within the 50% rule and under the optimistic scenario (which isn't complete fantasy) the place cash flows.