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50% rule
Also called: fifty percent rule
A rough assumption that operating expenses will consume about half of gross rent, excluding the mortgage.
The 50% rule is a sanity check against optimistic expense estimates. It bundles taxes, insurance, management, maintenance, vacancy, and reserves into one blunt assumption.
Actual ratios vary widely with property age, taxes, and whether the owner pays utilities. Use it to catch a projection that assumes almost no expenses, then replace it with real numbers.
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Related terms
- 1% ruleA screening heuristic that monthly rent should be roughly one percent of purchase price.
- Operating expensesThe recurring costs of running a property: taxes, insurance, management, maintenance, and owner-paid utilities.
- CapEx (Capital expenditures)Large, infrequent replacements (roof, HVAC, water heater), budgeted monthly even though they are paid rarely.
- NOI (Net Operating Income)Income after operating expenses but before debt service, taxes on income, and capital expenditures.
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