About the 50% Rule Calculator
The 50% rule is a quick screening shortcut for rental property investors. It assumes that about half of a property’s gross rent will be eaten by operating expenses — property taxes, insurance, repairs, maintenance, capital expenditures, vacancy and management — before you pay the mortgage. Whatever is left of the other half after principal and interest is your estimated cash flow.
Enter the monthly rent, the number of units, the purchase price and your loan terms. The calculator estimates expenses, net operating income (NOI), the mortgage payment, monthly and yearly cash flow, cap rate and cash-on-cash return, and the rent per unit you would need just to break even. A chart shows how cash flow changes if expenses turn out to be 35% or 60% of rent instead of 50%.
Use it to decide which listings deserve a full underwriting, not to make the final decision. Newer buildings where tenants pay utilities can run well under 50%, while older properties, low-rent areas and buildings where the owner pays utilities can run higher. Before making an offer, replace the 50% assumption with real tax bills, insurance quotes and repair estimates in a full rental property analysis.
With the default inputs, the estimated monthly cash flow is $135.52. Change any value above to recalculate instantly.
How to use the 50% rule calculator
- 1Enter the market rent per unit and the number of units.
- 2Add any other monthly income such as parking or laundry.
- 3Keep the 50% expense ratio or adjust it for the property type.
- 4Enter the purchase price, down payment, rate and loan term.
- 5Check monthly cash flow and the break-even rent before analyzing the deal in detail.
Formula and method
Gross monthly income is rent per unit × units plus other income. The 50% rule sets operating expenses at half of that figure, so net operating income (NOI) is the other half. The mortgage payment is the standard amortizing principal-and-interest payment on the purchase price minus the down payment. Cash flow is NOI minus that payment.
Operating expenses under the rule cover taxes, insurance, maintenance, capital reserves, vacancy and management, but not the mortgage. Cap rate is yearly NOI ÷ price. Cash-on-cash return divides yearly cash flow by the down payment only, so it reads higher than a full calculation that also counts closing costs and repairs.
- GI
- Gross monthly income (rent × units + other income)
- E%
- Expense ratio, 50% under the rule
- NOI
- Net operating income = GI × (1 − E%)
- P&I
- Monthly mortgage principal and interest
Worked examples
$200k single-family renting for $2,400
Half of the $2,400 rent ($1,200) is set aside for expenses, leaving $1,200 of NOI. A $160,000 loan at 7% for 30 years costs $1,064.48 a month, so estimated cash flow is about $136 a month or $1,626 a year — positive, but thin enough to deserve a closer look.
Duplex at $1,500 per side, 25% down at 6.5%
The duplex grosses $3,000, so the rule leaves $1,500 of NOI. The $262,500 loan payment is $1,659.18, giving negative cash flow of about $159 a month. Each side would need to rent for about $1,659 to break even, so this listing fails the screen at the asking price.
All-cash purchase
With no mortgage, cash flow equals NOI: half of $1,800 is $900 a month or $10,800 a year. On a $180,000 cash price that is a 6% cap rate, and cash-on-cash return equals the cap rate.
Frequently asked questions
What is the 50% rule in real estate?+
The 50% rule says a rental property’s operating expenses, excluding the mortgage, will average about half of its gross rent over time. If a property rents for $2,000 a month, you assume $1,000 goes to expenses and the remaining $1,000 must cover the mortgage and your profit.
What expenses does the 50% rule include?+
Property taxes, insurance, repairs and maintenance, capital expenditures such as roofs and HVAC, vacancy, property management, and any owner-paid utilities, HOA dues or landscaping. It does not include mortgage principal or interest.
Is the 50% rule accurate?+
It is a rough average, not a forecast. Newer properties with tenant-paid utilities often run 35%–45%, while older buildings, low-rent areas and properties with high taxes can exceed 50%. Use it to screen listings, then underwrite real numbers.
How is the 50% rule different from the 1% rule?+
The 1% rule compares monthly rent with the purchase price to judge whether rent is high enough. The 50% rule estimates expenses and cash flow once you know the rent and financing. Investors often use both together as quick filters.
What is a good monthly cash flow per unit?+
Many investors look for at least $100–$200 of cash flow per unit per month after all expenses, but targets vary with price, financing and appreciation expectations. More important is that cash flow stays positive if expenses run higher than expected.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.