Quick Question On 50% Rule

[Joseph Platyan]

I just want to confirm when using the 50% rule, we only use it to compare to the mortgage amount and not taxes, insurance, etc.?

So for example a property is 100K, has 1600/month in cash flow, with a $500 mortgage per month. So it's safe to assume using the 50% rule that $1600 / 2 = $800, I would have $300/month in true cash flow for this property?

[Eddie Werner]

It's not safe to assume anything.  I would not analyze deals this way.  Crunch all the numbers so you have to input values and get more accurate cash flow/return on investment calculations.  Use the BP calculator or a spreadsheet you can a make yourself.  If you are only using the 50% rule to calculate cash flow you will probably get into trouble.

Alot of other variables come into play like age of roof, windows, HVAC, etc.  If anything I may use the 1 or 2% rules just to quickly screen many properties.  I know my local area though and those rules are the very basic first step to qualify a closer look.  I would only recommend using them if you have local knowledge or a property manager that can help.