The 50% rule states that property investors should expect that a property’s operating costs should approximately be 50% of its gross income. The rule is a shortcut that property investors use to quickly predict the total operating expenses of a property.
Expenses included in the 50% rule:
- Property Insurance
- Property Tax
- Property Management
Any recurring operating expenses can be included here.
Expenses excluded from the 50% rule:
- Mortgage payment
- Tax on rental income
- Property Depreciation