I'm currently selling my half of an SFR and will be re-investing that into either a few SFR's or an MFR. A few investors have told me that here in Fresno and the Central Valley, for SFR's the 35% rule is more accurate than the 50% rule and for MFRs the 40% rule is more accurate.
Any insight on this? Has anybody else in my area experienced simular? Or has the 50% rule held firm here as well?
I own single families. I find that due to low taxes and insurance and new houses. My expenses are very low.
35% seems far too low for me and isn't a risk I would take. However, every property/scenario has its own unique factors to consider. Perhaps if you manage yourself, *and* you don't consider your own hourly/monthly cost of time you could get close to 40%?
Here is how I break down the 50% rule:
Property maintenance: 8%, unless you manage yourself?
Maintenance: 10%, this might be higher on an older property?
Capital Expenses: 10%, this might be higher on an older property?
Vacancy: 8.33%, assuming each unit is vacant 1 month of the year.
Property tax: 1.3% of market value on average for the central valley. If your monthly rent is 1% of MV, then this works out to be just over 10% of your rent roughly.
Insurance: 0.5% of MV.
I see these as my minimum assumptions. Add all of this up, and you get close to 50%. Lowering these estimates is almost always a bad idea in my opinion.
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