50% rule and taxes

50% rule and taxes

Investor · Midwest · Member since 2013 · 253 posts · 34 votes

What percentage of the 50% put aside for maintenance, management, taxes would be your max limit for the taxes?

I ask because I know taxes vary greatly all around the country. The area I am looking has, for example, a duplex at $169,900 one side rented for $775 and the other owner-occ. The taxes (researched through county website) are around $3400/year. I think the property is over-priced based on the numbers. But how about that percentage of 50% that is going towards taxes?

There is also a duplex at $121k both sides rented prob around $750/month each based on local numbers. Those taxes are also around $3100/year. I think these two properties have a high percentage going towards taxes, but wanted to check in here to see what others think about this.

There is also a property at $159,900 that has 4 units, prob $750 each based on local numbers that has taxes around $2200/year. Where do those taxes factor into my analysis and the 50% rule?

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  • Ned CareyPro Member
    Moderator
    Investor · Baltimore, MD · Member since 2008 · 17k+ posts · 13k+ votes
    13y

    The 50% rule assumes average taxes. But remember it is a rule of thumb and not exact. It is a screening tool not something you would base a buy / no buy decision on.

    My area has very high property taxes, higher than yours and I still use 50%. When I run my forecast it still comes pretty close to 50% on most properties.

    When you have a specific property in mind you should run actual numbers to the best of your ability.

    Good luck - Ned

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