50% rule and Annual Taxes

[Juan Rosado]

Hello!!

I am trying to analyze multiple properties each day. My goal is to house hack next year (buying a multifamily, living in one unit while the tenant pay the mortgage). I use the 50% rule to analyze properties and the "BP Mortgage Payment Calculator" to calculate mortgage payment. My question is with the Annual Taxes part of this calculator. Should I include the annual taxes number in this analysis, or just focus in income and general expenses? (income*0.5). For example, I was analyzing this Duplex the other day. 

Asking price: $329,500

Downpayment [(Asking price)*(3.5)]: 11,532

Loan Amount (329,500-11,532): 317,967

Loan Period: 30

Interest Rate: 4.38%

Mortgage payment: 1,590

Income: 3,600 (having both units rented after I move out)

Cashflow [(Income)*0.5 - Mortgage payment]: 210

Annual Cashflow: 2,520

CoCROI [(Annual Cashflow)/(Downpayment)]: 22%    (Please, could someone double check this calculation?)

Now, I found this "rule of thumb" to calculate Annual Taxes. It goes like this:

Annual Taxes = (Asking price) * 3% = (329,500) * 3% = 9,885

If I include this number in the "BP mortgage payment" calculator, the monthly mortgage payment will be: 2,411. Moreover, my numbers will go this way:

Asking price: $329,500

Downpayment [(Asking price)*(3.5)]: 11,532

Loan Amount (329,500-11,532): 317,967

Loan Period: 30

Interest Rate: 4.38%

Mortgage payment: 2,411 (with Annual Taxes)

Income: 3,600 (having both units rented after I move out)

Cashflow : (611)   (negative cashflow)

Annual Cashflow: (7,332) (negative cashflow)

CoCROI [(Annual Cashflow)/(Downpayment)]: (-64%)

Should I include the "Annual Taxes" in my 50% rule analysis? Why, or why not?

Thank you in advance guys, and I wish you the best in your real estate journey.

[Jimmy Dudley]

The rule allows you to quickly sort through a large number of properties quickly. Once you get the number down and begin your more in depth analysis you can take the time to look up the real values needed.