If he is a licensed broker, he has to follow the rules.

Bear in mind this is a business contract, there are no hard and fast rules so long as everything you do is legal.You and your perspective partner need to determine exactly what kid of deal you want to conduct.

I've been reading about the 2 percent and 50 percent rule and researched on different locations for properties that cash flow.

BTW, I am fine (no pun intended) with HUD and DOJ enforcing their rule(s).

Using 50% rule, it's a 23% cash on cash.

The problem with most real estate license education is you learn the rules, but you don't learn run your real estate career as a business.

How does HUD enforce the 50% occupancy rule?

@Kevin Seith Tear downs are more costly as mentioned by @John Moore there are usually additional costs for permits and engineering and you can't forget having to comply with all the current zoning rules like setbacks, off street parking, sprinkler systems, fire separation, density, lot coverage, and impervious surfaces.

@Sandy Paris As long as you learn how to apply the general rules and it makes the number easier for you to understand, then it can be a great idea!

Using the 50% rule right now your expenses should be at least $8K to $8.5K based upon what your total rents should be.