The 50% rule explained
Over the long run, operating expenses on a typical single-family or small multifamily rental — vacancy, repairs, capital expenditures, property taxes, insurance, management and owner-paid utilities — tend to consume about half of gross rent. The mortgage payment is not included. So: cash flow ≈ rent × 50% − mortgage principal & interest.
When 50% is too high or too low
- Newer properties with low taxes may run 35–40%.
- Older buildings, high-tax states (NJ, IL, TX) or tenant-paid-nothing buildings can exceed 55%.
- Short-term rentals are different: cleaning, furnishing and platform fees often push expenses well above 50% of revenue.
For a line-by-line estimate, use the rental cash flow calculator and our rental expense checklist.