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50% rule calculator
The 50% rule assumes operating expenses average about half of gross rent over time, before the mortgage. Enter rent and your monthly payment to estimate net operating income and cash flow in seconds.
Thin but positive. The 50% rule leaves little margin here. One expense assumption being wrong could flip it negative. Underwrite it properly before relying on the cash flow.
The 50% rule is an average, not your actual bills. For an itemized breakdown, use the cash-on-cash calculator.
How the 50% rule works
estimated net operating income = gross rent − expenses = 50% × gross rent
estimated cash flow = net operating income − mortgage payment
The 50% rule is a corrective. Left to instinct, most new investors estimate expenses at 20 or 30 percent of rent, forget the costs that don't hit every month, and talk themselves into cash flow that never materializes. Decades of operating data say that once you average in vacancy, turnover, repairs, capital replacements, taxes, insurance, and management, expenses land close to half of gross rent. The rule bakes that reality back in before you get attached to a number.
What the 50% covers
Property tax, insurance, vacancy, routine maintenance, capital reserves (roof, HVAC, water heater), property management, and the small stuff: turnover cleaning, lawn care, pest control. Everything except the mortgage. That's why you subtract the loan payment separately.
When the 50% rule is wrong
It's an average across a whole portfolio and a full ownership cycle, so any single property in any single year can be far off. A new build in a low-tax state with a long-term tenant might run 35 percent. A 1920s triplex in a high-tax city with annual turnover might run 60. Use the rule to catch fantasy cash-flow projections early, then replace it with real, itemized numbers before you commit.
The 50% rule end to end
estimated expenses (50%) − $1,200
estimated net operating income = $1,200
mortgage payment − $1,150
estimated monthly cash flow = $50
Fifty dollars a month is the honest read here, and it should give you pause: that's a rounding error away from negative. An investor using a naive 30 percent expense assumption would have projected $430 a month and been badly surprised. The gap between those two numbers is exactly why the rule exists.
50% rule questions
What is the 50% rule in real estate?
It estimates that a rental's operating expenses, everything except the mortgage, average about half of gross rent over time. So roughly half the rent is left as net operating income before you pay debt service.
Does the 50% rule include the mortgage?
No. The 50 percent covers taxes, insurance, vacancy, maintenance, capital reserves, and management. The mortgage is separate: you subtract it from the remaining half to estimate cash flow.
Is the 50% rule accurate?
It's a long-run average, not a monthly reality. Newer, low-tax, low-turnover properties often run below 50 percent; older, high-tax, high-turnover ones run above it. Use it to sanity-check a deal, then verify with real numbers.
50% rule vs the 1% rule?
The 1% rule screens rent against price. The 50% rule estimates expenses and cash flow. Different questions, often used together as a quick first pass before a full underwrite.
Why do investors overestimate cash flow?
They forget the lumpy, occasional costs, a turnover, a roof, a vacancy, that don't appear every month but average out to real money. The 50% rule forces those back into the estimate. Faro itemizes them per property so you don't have to guess.
Every calculator
Replace the rule of thumb with real numbers.
Paste a listing and Faro itemizes the actual taxes, insurance, and reserves from real comps: no 50% guess required.
Estimates for analysis and educational use only: not financial, investment, tax, or legal advice. Verify every number independently before making a purchase decision.