How important is it to follow the 50% or 2% rule.

[Nate Wilson]

Hi II am a newbie and looking for some advice on a property in Wear Nh. There is a duplex for sale for just under 200k. It generates $2000 on rental income and according to the calculators mortgage, taxes, and insurance would cost around $1000-$1200. Now I know this generates 1% income of the sale price and the 50% rule I would make a couple bucks. But I don't see who I couldn't make money off of this property. In a "perfect world" I would make $9600 to $12000 profit a year off this unit. I understand that will probably never happen. The house was built in 1980 and just recently renovated so everything is in good working order. Has a drilled well, plowing I can do myslef. What other expenses would I have? I understand things break and need to be replaced. I Am not looking to get rich ( it would be nice) but even if I had to dump $5000 a year into it that stil leaves me with $4600-$7000 yearly profits. 

Am I stupid for thinking this way or is everyone out to make the big bucks. 

Also on a side note I would rather deal with more middle class people than lower class, I have seen a couple triplexs in the Concord and Manchester aera that would probably generate more income but I feel like duplexes would bring it better renters. Any advice on this would be helpful 

[Marc Santos]

I typically plan for 5-10% vacancy but you may be able to find some data specific to your market. Also, are these units metered separately for water? It's customary here in RI for landlords to pay water mostly due to the fact that most multi unit buildings only have one water meter. Also, if you're paying $1200 per month in Piti then you're already at $14,400, add in some vacancy ($1,200) and that already brings you down to max potential cash flow of $8400. Trust me, you will spend some money on repairs and maintenance of you truly track those costs. A good rule of them is anywhere between 4-12% of gross rents. Even if you plan on 4% this still another $1000 approx. finally, don't underestimate the cost of turnover (in my opinion the most costly expense). Paint, new carpets, a few random repairs, pay a realtor to rent it for you, change locks, key copies, paying utilities while vacant, cleaning, etc etc etc can easily add up to $1000s of dollars.