Shorter investment lengthes for higher ROI?

[Cliff Rosa]

Trying to figure a way in which one could essentially have less than a 50% operating expense. With the 50% rule is it true to say that every year you have your property you will incur 50% in expenses? Im thinking that over a period of about 20 years operating expenses will equal to about 50%. Usually within a 20 year period, major appliances have to be replaced, roofs etc which in turn equals about 50% in OE during those years. So im trying to hit this as a short term investment, 2 to 3 years. Is it possible to say that OE can be as little as 25-30% for just a couple years give that
1-Property is in good shape
2- Tenants are well screened
3 Property is purchased a a good price.
4. Low vacancy rates
5. Im the property manager and can do alot of "fixing"

[Jon Holdman]

Good timing on your buying and selling, along with careful due diligence, might help you avoid some of those big expenses.

If you buy a house with a new roof, new HVAC, new plumbing, and sewer, you probably won't have to replace those things or have major repairs if you only hold for a few years.

OTOH, some of your biggest items are out of your control. Tenants can bug out without paying rent, leave a mess, and leave you with a month long vacancy. You can do all the screening you want and this will still happen. Even worse, you can have to deal with an eviction.

Like many investments, you can use gambling formulas to look at this problem. Blackjack may have a 99% payback. That's equivalent to the 50% rule in that its a long term payback. If you bet $1000 $5 at a time, its pretty likely you'll end up with something close to $990. OTOH, if you walk up and bet the $1000 all at once, its much more likely you'll end up with either $0 or $2000.

You're playing the same game. No particular SFR is going to hit exactly 50% in any particular year except by luck. It may be somewhat lower, though the fixed expenses can get up to 25-30% quite easily. It can be MUCH higher if you have a run of bad luck. Unlike blackjack, it can be far above 100%. The 50% rule is a long term rule that tells you where you'll be with a bunch of properties for many years.