Cost of Small Stakes Hold 'em

In the brick and mortar world of poker, which I prefer over the online game, in small stakes fixed games be wary.  Many of the players who like Hold 'em but either want or need to limit their risk should be more aware of their actual cost of play.  In a typical $1/$2 fixed game the rake is generally 10% of the pot with a maximum rake of $5.  How does this impact your return, from either the true bottom line or expected value?
 
As a nearly exclusive no limit hold 'em player, I have to admit it was somewhat of a grind for me to play the $1/$2 limit game in researching for this article, but my hope is that the result will benefit your game selection and your overall game experience.   Over a span of 500+ hands at a 9 player max table, the average rake for non-maxed out hands was 13.5% of the pot.  Maxed hands averaged 9.8%.  This does not take tips into account.  It also ignores a jackpot rake for any hand that plays to bets totaling a minimum of $10, which drops another $1 from the pot.  I throw this out since eventually, a number of players either receive back all of their own portion of drop, and some of them even profit if they are regulars.  I also ignore it as some card rooms have no jackpots or worthwhile promotions for the players. 

In my five years of live play I have been at the "bad beat" table (no limit) twice for table shares totaling $3,200.  I have also had high hands or "cracked aces" that paid out house promotions from $100 to $599.  Although I have not calculated my portion relative to pots won, I am still comfortable that I can stay break-even or ahead of the jackpot/promotions drop over time.
 
Of the 13.5% actual rake referenced from this fixed game sample, for pots under $45 (if the pot reached $45, the rake goes to $5 max), the percentage is skewed over the "10 percent max rake not to exceed $5" due to a minimum rake requirement of $1 for any called hands pre-flop.  For clarity, if all hands fold except the small and big blind and a flop is seen, in many rooms a dollar is raked.  In a typical $1/$2 game, there are two blinds of $1.  The players in my regular poker room could chop the hand and pull back their blinds, but if the flop is seen, a dollar disappears from the pot immediately.  If the hand is checked down - that's a 50% rake.  If there follows one bet and a call, then no further betting, it's still 25%, and so on.  The other influence on the 13.5% house net on non-maxed rake hands is the round up rule.  If $15, or in some rooms $16 is in the pot, the rake becomes $2.  If the pot is $25 or $26 in total betting, then the rake is $3, etc. 
 
In a $1/$2 fixed game, over time your only hope of profits - from wins only - (not jackpots, promotional bonuses, etc.) is to regularly play with opponents who have little concept of the game.  If even half the players know the value of hands or have even a partial understanding of drawing value or have made hands of ANY value before the river card, you will regularly fall behind by 1/8th (12.5%)  of your buy-in.  Remember, this is just based on rake.  If you tip, and most of you do - and should - your net average loss over time will exceed 15%.
 
From my calculations, an average of 46% of the table sees the flop in a low limit fixed game.   Even the most knowledgeable of players will constantly fall to the cost of the game when playing 1 against 3 or 1 against 4 every time they show down a hand.  Keep in mind that the cost of 12.5% of the pot only references hands that you win.  It takes nothing into acccount for hands lost, since you are unimpacted by rake on lost hands.  In those situations, you are only subject to the loss of every chip you bet! 
 
Let's take a hypothetical case of a fairly tight and knowledgeable player at a reasonable and stable table.  If it were related to weather you could call it perfect conditions for this style of player.  Typical stats over 500 hands may look like this:  Flops seen - 23%.   Since a few of these will be raised hands pre-flop, the cost of seeing 115 flops (23%) is $150.  If you have a relatively hot day in terms of actually hitting or maintaining the winning hand 30% of the time when you see a flop, then you will win about 35 hands.  Keep in mind that in low limit games you rarely get the hand to heads-up before showing down.  The pots won would typically average $16.50  This is an average return of $5 of your own bets and $13.50 of opponent's less a $2 rake.  Being stingy let's average $1 tips, and for this example we'll allow a $1 promo/jackpot drop.  Net +$9.50 per winning hand.  During your play you also bet/called away $80 on pre-flop action (some were blinds), another $15 on eventual bet or raised hands that you fold, $65 on unraised blinds that materialized no hands and were folded (out of an estimated 120 total blinds), and $40 on correct odds calls post flop that either missed or hit and lost anyway.   On this "hot" but long day - for a tight player - the profit is rounded to $120.   How many hours is 500 live dealer hands?
 
In a low limit fixed game on a perfect conditions table, the average number of hands per hour played is 30.  If you want to play 16.5 hours for $120 when you are hot, I wish you the best.  No one is hot every day, or even every other day.  Let's extend the hypothetical to 5 days, average 8 1/4 hours per day (half of the long day as a hot player would mean a profit of $60).   You are hot on days 1 and 3.  You are break even on days 2 and 5, but you have a bad run and odds ignore you on day 4, but you lose only $30!  I am giving every advantage that is within the norms of statistics and practical application (reality).  You played an entire work week, 41.25 hours for a net take of $90.  You were up for the week!  However, your pay rate was only $2.18 per hour.  You had only 1 losing day, and on that one day you lost only 1/4th of your total from the winning days.  It doesn't seem right.  But remember, you paid 12.5% of your gross in wins to the rake.  If you hedge your thinking and say that whatever you make (as an amateur player) is essentially tax-free, think again.  Self-employment tax against net net income is 15.3%.  You only have to net out over $400 for the year for that to be true.  Your poker player rate is 12.5% of gross pots won.  Your government, in essence, is the poker room that you support. 
 
The rake percentage average is significantly lower on no limit tables.  For all poker games, the higher the stakes - the lower relative house "cost" to play.  Just the facts, m'am.  Play the low limit fixed games for reasons other than profits, and you will improve your odds of enjoying the social experience of poker.  After all, the intangibles have real value too. 

Article submitted by Mike B