Buying first property, is 2%, 50% rule applicable in Boston?

[Adam Anderson]

Hi everybody,

Newbie here, looking to buy my first property. I'm not totally green to the life of a landlord, as I have managed my dad's 4plex property since I was a teenager. However, he bought in the 90s, in a nice part of Jamaica Plain, so the high rent, no crime, no mortgage payment combination will surely be impossible for me.

I have been looking into 3plexes in Dorchester. There are some properties there in the $700-800k range, mostly turnkey, with about $6k in rent a month. I will be going in at 20%, so looking at $4k a month in mortgage, taxes, and insurance. Initially, I thought of the $2k "profit" a month being cut down to $1k a month with water bills and various repairs here and there. Yet I keep hearing about this 50% rule that half the gross rent will be put towards expenses... is this rule really applicable to Boston? $3k in non-mortgage expenses sounds ridiculous... that's $36k a year. Unless my tenants are burning down their apartments annually, I can't imagine that figure being accurate.

Our expenses in the JP 4plex honestly don't exceed $700 a month, if that.

Does this rule maybe only apply to areas where rent isn't as high as Boston?

Am I naive to think $6k in rent, minus $4k (mortgage, tax, insurance), minus $1k (water and various costs) = $1k profit per month?

Thank you! Looking forward to learning a lot from you all.