50% rule...? PI vs PITI

[Chris Vasquez]

Rookie question here. 1.When financing a rental property. Do you favor Principal+Interest or PITI included together in your payments when the mortgage is set up.
2. Using PITI. Why wouldn't you figure in the tax and insurance into the side of debt service? Or does it really matter in the formula?

[Steve Babiak]

Taxes and insurance are considered as expenses in the 50% "rule of thumb", whereas the debt service (P&I) will not be considered in the expenses. So, 50% goes to expenses, while the other 50% goes to debt service and net cashflow.