The 50% rule cash flow.

Not financial advice. This is an estimating tool built on the numbers you enter. Real estate returns depend on assumptions that can be wrong; check them with a lender, an accountant and local sources before you buy.

Worked example

Rent $2,400 a month. At 50% the estimated expenses are $1,200.00, so monthly NOI is $1,200.00 ($14,400.00 a year). A $150,000 loan at 6.5% over 30 years costs $948.10 a month, so cash flow is $251.90 a month ($3,022.78 a year).

How it works

Estimated expenses = rent x expense %. Monthly NOI = rent - estimated expenses. Mortgage payment = standard amortized payment with monthly compounding. Cash flow = NOI - mortgage payment. If you enter your own expenses, the calculator shows them as a percentage of rent for comparison.

Sources and basis

The 50% rule is a common rule of thumb, not a published standard, so no source is cited for the percentage. Your real ratio depends on property taxes, age of the building, who pays utilities and how the property is managed.

FAQ

What is the 50% rule in real estate?

A shortcut that assumes operating expenses (everything except the mortgage) are about 50% of gross rent, so about half of the rent is left to pay the mortgage and provide profit.

Does the 50% rule include the mortgage?

No. The 50% covers taxes, insurance, repairs, vacancy, management and utilities. The mortgage comes out of what is left.

Is the 50% rule accurate?

It is a rough shortcut and not a published standard. Costs vary with the building’s age, who pays utilities and local property tax, so your real ratio can be above or below 50%. Use real quotes and bills where you can.

How do I use my own expense number?

Enter it in the optional box and the page shows it as a percent of rent. You can also change the expense percent field. The default 50% with $2,400 rent means $1,200 of expenses.

Is the 50% rule the same as the 1% rule?

No. The 1% rule screens rent against price; the 50% rule estimates what is left from rent after expenses.