ROI for large purchases and small

[Koel Gaylord]

I have been looking at MFR and three bed two bath are nice, however, they are much pricier than 2 bed 1 bath and bring in the same ROI due to larger/smaller mortgage costs. Although I can ask higher rent for the three bed, the mortgage is higher which reduces my cash flow. I'm wondering if I should free up more working capital and go with the 2 bed at a lower price/lower rent instead of the 3 bed/higher rent...I am finding out that it's the same ROI in my area. Lafayette, Indiana.
Koel

[Michael Lauther]

Koel Gaylord The 50%rule is a rule of thumb that tries to estimate what the real cost of maintaining a rental property will be. Costs would include taxes, insurance, maintenance, property management and vacancy. It has been determined that for single family properties these costs will typically be 50% of the gross monthly rent but it is only a starting point when considering an investment. The mortgage minus the rent will not tell the whole story by a long shot. Many investors do not use leverage so the 50% rule is used to evaluate a property irrespective of financing the cost of which would come out of net operating income.