50% rule is half of the story, what's the other half?

[Jacob Clark]

I am looking for good concise information regarding the remaining 50% after 50% goes to the financing for a real estate investment.  What percentage should be spent on management, vacancies, capital expenditures, etc?

[Christopher Phillips]

@Jacob Clark

50% rule is just for a quick swag for back of the envelop calculations.

It only assumes the operating expenses. It does not include the mortgage related expenses.

The operating expenses for a rental property would include things like property taxes, hazard insurance, property management, maintenance reserves, capital expenditure reserves, utilities not paid by tenants, snow removal and landscaping, admin related fees, vacancy reserves.

Then you would need to include the mortgage (principle and interest), and mortgage insurance.

Note, in parts of the country with high property taxes, the 50% doesn't really work.