50 % Rule Question In Relation to FHA Monthly Mortgage Insurance Premiums

[Kasey Ryan]

Hello there Bigger Pockets Community,

Kasey Ryan here, new investor, new to real estate, new to BP.

I have been doing quite a bit or research and have stumbled across one particular question that I cannot seem to find an answer for, I'm very sorry if it is already answered elsewhere but I've looked and cannot find it.

I'm possibly going to use an FHA loan to purchase a multi-family property, live in one unit, and rent the rest. I'm using the 50% rule to estimate expenses besides the principle and interest. HOWEVER, I cannot find verification anywhere as to whether or not that should generally include the monthly mortgage insurance premiums that are tacked on to FHA loans or not. So... with that said... should it? Should I assume that 50% of the rents will go to expenses including the monthly mortgage premium or should I assume that will be over and above the expenses?

Since it is an additional 1.3% or so of the principle every year, I feel it changes the analysis substantially enough to warrant the question...

Thanks for any and all input!

-Kc

[Christian Bors]

PMI is not an expense, it is part of the mortgage. Therefore, it should not be included in the 50%. Also, the purpose of the 50% rule is to quickly analyze a property. You should do your due dillegence prior to any purchase. Solely relying on the 50% is risky.

Great strategy! I recently bought a triplex using the FHA loan. With this purchase, I am bascially living free/making about 50 bucks a month. With the extra savings, I hoping to purchase my next property very shortly and rapidly grow my portfolio.

Good luck! And let me know if you have any questions regarding this strategy.