Beating The 50% Rule

Our rental suite is so close to being done. It's been a pretty long slog, particularly for Mr. Hutch. We have only a few things left on the to-do list: hanging closet doors, building a few shelving units, hanging the towel holders in the bathroom. Finishing-type stuff.

There is an aptly-named theory in real estate investing (The 50% Rule) that states that your monthly mortgage payment (principle + interest) on any rental unit should be no more than 50% of the monthly rent you receive. In our expensive city, there is no way this is achievable by buying new properties. But by building a rental suite within our existing home, we blew The 50% Rule out of the water.

So how about some numbers? We've got a few outstanding payments to make, but all told we should be in to this sucker for just north of $70,000. We added approximately $500 to our monthly mortgage payment in order to finance the building of our suite, but we expect to collect somewhere in the neighborhood of $1300 per month, plus we will enjoy some decent tax deductions. A pretty decent trade-off if you ask us, especially if you measure it by The 50% Rule.