Does the 50% rule include taxes?

5 Replies


Does the 50% rule include taxes? Also, how are the taxes on multifamily properties made? As a regular LLC annually, quarterly, monthly?

@Arturo Borges Very good question man. As far as I know the 50% does include taxes. When I do my analysis I include that in the 50% rule I don't see why you wouldn't but there may be another explanation or side of things. As far as your second question I really don't know and am interested to see what others will say!

Howdy @Arturo Borges

The 50% rule includes all expenses (Vacancy, PM, Tax, Insurance, Maintenance, CapEx, Utilities, etc). It does not include P&I payments. Expenses can obviously vary from property to property, city to city, state to state. I have seen many comments from much more experienced investors than I that they tend to average over the years close to 50%. But insurance is typically included in it.

it sounds like you might be referring to income tax and not property tax. @John Leavelle is correct about the 50% rule, although you are better off just getting actual numbers and running your numbers on the real thing from the beginning.

LLCs are pass through entities, so gains/losses pass through to your personal return and are calculated annually when you file your personal return.

Property taxes, yes.
Income tax, no.
But, it’s just a rule of thumb.....your expenses will be different, either higher or lower.

@Arturo Borges As a *rough* estimate, it includes everything but “debt service”. So if gross rents are $1,000 per month I should (over the long haul) average $500 per month for debt service + PROFIT! Now it never quite works out that way but it’s a good 30-second screen metric when looking at a property.

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