Does 50% rule account for future big ticket items?

[Taylor Green]

Hi, I have been reading about the 50% rule and I use it for my rough analysis. My question is: Is he 50% rule enough to cover major expenses if you plan on holding the property for many years (roofing, AC, etc) or do you budget for those expenses when you see the time is near to replace. Thanks.

[Roy N.]

Taylor Green

Over time, yes. If it happens right away, you will still take a kick to the cash flow ... or, if you have not managed to build your contingency, you may need to inject more capital into the property.

In our operating expense calculations we allow a 10% maintenance and CapEx set-aside each year ... unless we are buying a property with known higher amounts of deferred maintenance, where we sometimes use a 15 - 20% set-aside.