Expense Projections using 50% Rule

[Brandon Eleazer]

Hello BP,

I am preparing a budget for a SFH that costs $50k. The monthly rent is $1k. Using the 50% rule of thumb I don't see how $500/month (which amounts to $6k per year) is enough to cover all expenses except P&I.

Here are the known fixed yearly costs:

Taxes $1,320
Insurance $960
Rental License $50
PM (10% of $12k rent) = $1,200

These total $3,530, which leaves $2,470 per yr($6k-$3,530=$2,470) for variable costs (i.e. turnover repairs, general maintenance, vacancies, etc.)

Only budgeting $2,470 for an entire year does not seem to work. For example this is only barely enough to cover a few plumbing and electrical repairs, and the cost to clean and paint the unit when a tenant moves out, just to name a few things.

Am I missing something here or does it appear there is not enough income to cover expenses? Thank you.