50% rule
A shortcut estimate: about half of gross rent goes to operating expenses (not including mortgage). Useful for quick napkin math on rentals.
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Part 1 of 4
Why a seller cares
The 50% rule says about half of gross rent goes to expenses before the mortgage. When an investor screens your rental, they assume it whatever your records say, and your NOI figure gets compared to it.
Part 2 of 4
A simple example
Your duplex grosses $27,000. The 50% rule assumes $13,500 of expenses, leaving $13,500 of NOI; your records show $16,000.
| The estimate | The NOI it produces |
|---|---|
| The 50% rule | $13,500 |
| Your actual records | $16,000 |
| What the buyer underwrites | Somewhere between, closer to yours if the records are good |
The 50% rule is the buyer's default. Real records move them off it.
Part 3 of 4
What people get wrong
That the rule includes the mortgage. It does not; the 50% is operating expenses only.
Part 4 of 4 · where to read next
Where it appears in the sale
What a definition is, and what it isn't
Keighbor is a software company, not a law firm, brokerage, or tax adviser. This is general information, not legal, tax, financial, or real estate advice about your sale. Your situation may differ. Before acting on a contract, disclosure, title, tax, or pricing question, ask an appropriately licensed professional in your state.
Written and researched by Keighbor Research · drawn from the reference glossary · how we research and check what we publish
In your Room, this word explains itself where it appears.
Your Room defines 50% rule in the step you meet it in, beside the document or the date it belongs to. Free to set up, with an agent or on your own.
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