50% rule seems high?

[Chris Ruud]

I've been reading about the 50% rule (a quick way to estimate expenses being 50% of gross rental income) and have tried to apply it to properties for sale and it always comes out consistently too high.  The numbers I'm coming up with are that expenses are around 30-35% of gross rent.  I just want to make sure I'm not missing something or being unrealistic.

In my area near Los Angeles, it would be realistic to find an average SFR for about 500K and have rent come in around 2500-2800/month. Assuming rent of 2700 here is what I'm calculating monthly expenses could be:

10% repairs and capex - $270

5% vacancy - $135

3% insurance - $81

17% property taxes - $450

Which comes out to 35% total.  Is there something I'm missing?

[Austin Fruechting]

The 50% is a VERY general rule of thumb. Expenses will typically be less as a percentage on higher dollar rents. Why? Think of the cost of an HVAC service call and repair to the monthly rental amount of $2,800. That service call and repair won't be much less at a property that rents for $800, but represents a lot higher percentage of the rents.