50% rule question

[Fred Heller]

When estimating operating expenses using the 50% rule, do you include property taxes and insurance as part of the 50%? Or do you consider that part of the mortgage payment?

50% seems kind of high to me without the taxes and insurance included. For a $1000 a month lease, that would be $6000 in maintenance costs. I personally have never spent more than a few hundred dollars a year on maintenance costs, unless I replace some major component like HVAC. But if insurance and taxes are included in the mix, then it makes more sense to me.

Thanks

[Steve Olafson]

I realize that this is something of a BOE way of taking a quick glance at a property but, I'm surprised that there are not more seasoned apartment investors questioning this as a tool.

You are in Houston.  From my experience this formula may apply there for average product.  It would not apply as well for the B and D product though and it certainly would vary based on the utility situation. 

Insurance and taxes are higher in Houston than in other parts of the country.  Significantly higher.