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50% Rule Calculator

Use the 50% rule to fast-estimate rental operating expenses and cash flow from rent and mortgage payment alone.

Gross monthly rent

Expense ratio

Mortgage payment (P&I)

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How it works

Estimated expenses = rent × 50% · NOI = rent − estimated expenses · Cash flow = NOI − mortgage (P&I)

The 50% rule is a back-of-the-envelope shortcut: over the long run, roughly half of a rental’s gross rent gets eaten by operating expenses — taxes, insurance, maintenance, repairs, management, and vacancy — not counting the mortgage. So a quick cash-flow estimate is half the rent minus the loan payment. It deliberately excludes principal and interest, which you subtract separately, because financing varies by buyer. Use it to screen deals fast; then replace the 50% with itemized expenses once a property looks promising.

Worked example

A unit rents for $2,000 a month. The 50% rule assumes $1,000 goes to operating expenses, leaving $1,000 of net operating income. Subtract a $750 mortgage payment and estimated cash flow is about $250 a month, or $3,000 a year — a first-pass figure to confirm with real numbers.

Frequently asked questions

Does the 50% include the mortgage?

No. The 50% covers operating expenses only — taxes, insurance, maintenance, capital reserves, management and vacancy. You subtract the mortgage principal and interest separately, which is why financing terms don’t change the 50% estimate itself.

When is the 50% rule inaccurate?

It is least reliable for very high-rent properties (where expenses are a smaller share) and for older or high-tax properties (where they’re a larger share). Newer, low-maintenance buildings may run below 50%, while old buildings with heavy repairs can exceed it.

How does it compare to the 1% rule?

The 1% rule screens the purchase price against rent; the 50% rule estimates expenses and cash flow from rent. Many investors apply the 1% rule first to filter, then the 50% rule to sanity-check the likely cash flow.

Related calculators

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Cap Rate Calculator

Find a rental property’s capitalization rate from its net operating income and value, or work backward to the value a target cap rate implies.

Vacancy & Operating Expense NOI Calculator

Build a rental property’s net operating income from gross rent, a vacancy allowance and operating expenses — the foundation of any valuation.

Rental Property ROI Calculator

Estimate a rental’s annual cash flow, cap rate and cash-on-cash return from its price, rent, expenses and mortgage.

Educational estimate, not financial or investment advice. Real returns depend on financing, local costs and market conditions.