50% Rule Really Effective on SFH?

2 Replies

I am having a bit of trouble finding much relevance for applying the 50% Rule to SFH...especially if the property is rehabbed with very little chance there will be maintenance costs...and if the tenant pays utilities...doesn't seem to make much sense to consider the 50% Rule during purchase/due diligence...

Brandon Sturgill, Real Estate Agent in OH (#2015001666)
9379797000

If you don't take into account maintenance, property management, or CapEx reserves, then yes, it would appear that the 50% rule doesn't apply as Taxes and Insurance are just a small part of the monthly expenses. My experience is to have one medium ($400-500) maint amount about every two years. Then the CapEx expenses such as A/C, Heater, Water Heater about once every 5 years. However, I'm in a partnership owning a tax foreclosure property and it's maintenance expenses at the moment are running about 50% of rents.

I think it's good to consider the 50% rule to understand if a deal can be a good one. But I ultimately try to determine what my actual expenses (with assumptions for maint, and CapEx) are and use that as my final determination.

Originally posted by @Bradley Benski:

If you don't take into account maintenance, property management, or CapEx reserves, then yes, it would appear that the 50% rule doesn't apply as Taxes and Insurance are just a small part of the monthly expenses. My experience is to have one medium ($400-500) maint amount about every two years. Then the CapEx expenses such as A/C, Heater, Water Heater about once every 5 years. However, I'm in a partnership owning a tax foreclosure property and it's maintenance expenses at the moment are running about 50% of rents.

I think it's good to consider the 50% rule to understand if a deal can be a good one. But I ultimately try to determine what my actual expenses (with assumptions for maint, and CapEx) are and use that as my final determination.

 Bradley, thanks for the insight.

Brandon Sturgill, Real Estate Agent in OH (#2015001666)
9379797000