Has anybody ever heard of a 10-2 principal

[Zach Clark]

My grandfather is an old school investor all his rentals are paid for. He always said that 2 months should pay for taxes insurance repairs for the year and 10 months should be profit. Is this a real thing has anybody ever heard of that and does it make any financial logic.

[Joe Splitrock]

The only 10-2 principal I am familiar with is that a full time investor should never start work before 10 am or work past 2 pm, haha. Thanks for sharing your grandfathers principal. For paid off rental properties, this basically means 16% of total income should go towards expenses. That is also known as 16% expense ratio. As others mentioned, the 50% rule is assumes a 50% expense ratio. For my business, 50% expenses is fairly high but 16% would be low. It is also worth mentioning that your grandfather may not be including vacancy, management and CAPEX in his numbers. He is probably self managing and vacancy/CAPEX are not regular "hard" expenses, so they are often overlooked.

Can you share any other wisdom that your grandfather has to offer? I love hearing new (old) perspectives.