[[…Do experienced investors stick to the 50-50 rule all the time?..]]]
I never buy by the 50% rule. It’s not possible in my area. If I get $100,000 off the price and make a huge down payment, I consider myself lucky if the rent will pay the mortgage.
However, I can assure you that over time, your expenses ARE going to run about 50%. So if you are not going to buy by the 50% rule, you’d better be darn sure you know what the expenses are going to be and where the money is coming from to pay for it.
I always buy for the property’s potential for appreciation. I’m in a market where appreciation can be counted on— when we are on the up-cycle. That makes real estate in my area a long term game. There’s some “wait” in the hold and wait.
There are a lot of expenses with rentals that are completely out of the landlord’s control, and that means they are difficult to budget for.
The county raises taxes without my permission, the insurance company raises my rates without consulting me.
I have a house in one neighborhood, where the owners were able to fight off the city’s plan to charge us each $30,000 for a new sewer system. OK good, but the city then started to bill us $30 a month for “storm water management”. That’s coincidentily exactly the same amount they charge each month for a sewer fee. And believe me, no one asked me if I wanted to pay it and I am getting exactly nothing in return. The nearst storm drain is miles away, and my rain water isn’t getting anywhere near it.
Tenants move out when it is inconvenient. Sometimes it takes a long time to find a replacement tenant.
You can cut down on tenant damage by careful screening, but occassionally a bad one sneaks through, or a good one goes bad, and damage can cost thousands of dollars.
Remember, your income is coming from someone who is incapable of balancing their own checkbook. Sometimes tenants are late and sometimes they just stop paying. It takes awhile to get them out. During that time, your expenses go up and your income goes down.