Another quick way of evaluating a buy-and-hold for the rental income would be the 50% rule.
The 50% rule states that on average the expenses for a rental property would be about 50% of the rent. This does not include any loan payments for the property.
As a rough estimate your expenses will look something like this:
– 5% on maintenance and repair
– 10% on capital expenditures
– 10% on property management
– 10% on property taxes
– 5% on insurance
– 10% on vacancy and turnovers
It is okay to use an educated estimate on these numbers since over the long-term it tends to even out. So if all your expenses added up to 50% of the possible rent, you would then have the remaining 50% for profit/to pay the mortgage.
Schedule a 15 minute consultation with us to learn more about how you can utilize the 50% rule to help you find your first or next real estate investment.