Couple of questions on the 50% Rule
Hey everyone, new guy here. Loving the forum and the info. I have a few questions in regards to the 50% Rule. I may be making a simple rule too complex, but curiosity is making me ask haha.
Example:
We identify a property and gross rev. is $2000/month. Subtract operating expenses of $1000 (50% of gross), then we have an NOI of $1000. Subtract the monthly mortgage payment of $500 and we are left with CF of $500/month.
Questions:
- Does the monthly mortgage payment consist of principal and interest only?
- What is the goal return you all shoot for on a deal?
- If the deal makes sense for you, what other rules/analysis would you all follow this up with?
Thank you!
Most Popular Reply
1. Yes the monthly mortgage is just the P&I.
2. This is completely dependent upon your area. For instance here in CO a lot of folks who would reference the 1% or 2% rules aren't really reaching those numbers. We're only really getting .6%-.8% on most "deals".
3. Seeing the property :-). You figure out a baseline to figure out if it's worth your time to see a property. Then when you're onsite you figure out more realistic expenses. For instance is the furnace new or old, same with the roof. Those will change your Capex estimations.
- Dan Mackin
- 720-466-3378