I usually just look at the final price (after repair value) and subtract out the repair work, holding costs, closing costs, and my profit.

With this 50% rule it would mean $22k would be needed in repairs per year, averaged over time.

From the conservative 2%/50% rule, in comparison, you'd be getting 1.5%, and half of your income ($575/mnth) is going to repairs averaged over time.

Then, repair what is needed and rent it out.

Okay subtract out the repair costs.

Otherwise, it's a mess trying to get any repair deductions after you have an approval letter.

I live in Chicago, and being a city guy I am interested in starting out by investing in smaller multi family dwellings (2, 3, 4 flats) doing minor rehab/repair work, maximizing rent potential, minimizing maintenance costs by managing the buildings and tenants myself, and holding on to them for a while and see what I can make of it.

Originally posted by Brian Burke:The most common reason that I reject a deal from a wholesaler is that they overestimate the ARV, or underestimate the repairs.

Remember net will include all expenses including property taxes, insurance property management, repairs etc.

When you factor in the 50% reserve, this is basically saying that you take 50% of the top of the gross rents and save this for maintenance, repairs, and other operating expenses.