1% Rule Calculator

A pass and a fail, side by side

A $220,000 property renting for $2,200 a month sits at exactly 1% of its price — a pass against a target rent of $2,200. It is the same property that runs through the Rental Property Calculator example: with 20% down ($44,000), a 7% loan over 30 years, a 5% vacancy allowance, $650 of monthly operating expenses, $5,000 of closing costs, and $3,000 of initial rehab, the full analysis shows $269.07 of monthly cash flow. A $300,000 property renting for $2,500 manages only 0.83% against a $3,000 target — a fail, $500 a month short. Run that second property through the same full analysis with the same illustrative financing and expense inputs (20% down, 7% over 30 years, 5% vacancy, $650 of expenses, $5,000 closing, $3,000 rehab) and it shows $128.27 of monthly cash flow — positive, despite failing the screen. The screen and the full analysis are different instruments. This page explains exactly what the screen measures, and the guide The 1% rule and GRM as screens sets it beside its sibling, the gross rent multiplier. Every result on this page is computed at build time by the same tested engine as the calculator above; the inputs are illustrative values entered for the examples, and the few differences and shares quoted beside them are arithmetic on those inputs and results, not typed figures.

What the calculator computes

The engine takes two inputs — purchase price and expected monthly rent — and returns three things. The target rent is the purchase price multiplied by 1%: for $220,000 that is $2,200, and for $300,000 it is $3,000. The actual ratio is the monthly rent divided by the purchase price, expressed as a percentage: $2,200 ÷ $220,000 gives 1%, and $2,500 ÷ $300,000 gives 0.83%. The pass flag is a single comparison: the property passes when the actual ratio is at or above 1%, and fails otherwise. There is no third input, no weighting, and no adjustment — nothing about the loan, the vacancy, the taxes, or the condition of the property enters the arithmetic.

Because rent is monthly and price is a one-off figure, the ratio is sometimes easier to grasp on an annual basis. Twelve months of the target rent come to $26,400 on the $220,000 property, which is 12% of the price in gross rent per year. That annual form is also the bridge to the gross rent multiplier, below.

Both inputs are validated before anything is computed. Each must be a finite number greater than zero, and each is capped at an upper limit the engine enforces; outside those bounds the calculator shows a message instead of a result. Entering a rent of zero with a price of $200,000 returns "The monthly rent must be greater than 0.", and a negative purchase price returns "The purchase price cannot be negative." Nothing is silently corrected.

More screens, on deliberately different inputs

The ratio behaves the same way at any scale, so the clearest way to see what it does is to run it on inputs chosen for contrast. Each example names its inputs; the results are the engine's.

• $150,000 price, $1,800 rent. Target rent $1,500; actual ratio 1.2%; a pass, with $300 of monthly rent above the target.
• $440,000 price, $4,400 rent. Target rent $4,400; actual ratio 1%; a pass. Doubling both inputs of the $220,000 example leaves the ratio unchanged — the rule is scale-free and says nothing about the size of the purchase.
• $250,000 price, $2,499 rent. Target rent $2,500; actual ratio 0.9996%; a fail, by $1.00 a month. The calculator's display rounds the ratio to 1%, but the comparison runs on the unrounded figure, so the pass/fail line and the rounded display can appear to disagree at the boundary.
• $500,000 price, $3,000 rent. Target rent $5,000; actual ratio 0.6%; a fail, $2,000 a month short. The gap is the useful number here: it states how much more monthly rent — or how much lower a price — the convention would require.
• $80,000 price, $950 rent. Target rent $800; actual ratio 1.19%; a pass. A small purchase price makes the target small in dollar terms, and the screen has no way to know whether the rent entered is achievable.
• $180,000 price, $1,650 rent. Target rent $1,800; actual ratio 0.92%; a fail, by $150 a month. Solving the same ratio for price instead of rent, $1,650 of monthly rent meets the convention at a price of $165,000, where the engine reports 1% — the "price the rule supports" reading of the same arithmetic.

The same screen, restated as a gross rent multiplier

The gross rent multiplier divides price by gross annual rent; the 1% rule divides monthly rent by price. They are the same two numbers arranged the other way round, and the Gross Rent Multiplier Calculator makes the correspondence exact. The $220,000 property at $2,200 a month — the exact-1% pass — carries a GRM of 8.33 on $26,400 of annual rent, equivalently 100 months of gross rent. That is what "1% a month" means in multiplier form: the price equals 100 months of rent. The $300,000 property at $2,500 — the fail — carries a GRM of 10, or 120 months of rent; a higher multiplier and a lower rent-to-price ratio are one fact, not two. Neither form includes vacancy, expenses, or financing, which is why both are screens. The guide The 1% rule and GRM as screens works through both on the same inputs and sets out what each one leaves out; the rest of this site's guides are listed at /guides/.

What the screen ignores: expenses

The rule uses gross scheduled rent and nothing below it. Two properties with identical prices and rents screen identically no matter what they cost to run. Take the $220,000 property at $2,200 with a 5% vacancy allowance. With $650 of monthly operating expenses entered, the Cap Rate Calculator gives a net operating income of $17,280 a year and a cap rate of 7.85%. Change only the expense line to $1,100 a month and NOI falls to $11,880 and the cap rate to 5.4%. Both versions pass the 1% rule at exactly 1%, because the rule never saw the expense line. Run the heavier-expense version through the full rental analysis — the same 20% down, 7% over 30 years, $5,000 closing, and $3,000 rehab — and the monthly cash flow is -$180.93: negative, on a property that passes the screen. Operating expenses, by the convention this site uses throughout, exclude mortgage principal and interest; they are the costs of running the property, and the screen does not ask for them.

What the screen ignores: financing

The rule has no loan input, so it cannot distinguish a cash purchase from a heavily financed one. Hold the $220,000 property, the $2,200 rent, the 5% vacancy, the $650 of expenses, the $5,000 closing, and the $3,000 rehab fixed, and change only the down payment. At $44,000 down with a 7% loan over 30 years, the mortgage payment is $1,170.93, monthly cash flow is $269.07, cash invested is $52,000, and the cash-on-cash return is 6.21%. At $110,000 down on the same terms, the payment is $731.83, cash flow is $708.17, cash invested is $118,000, and cash-on-cash is 7.2%. The cap rate is 7.85% in both cases, because cap rate is financing-independent by construction — and the 1% ratio is 1% in both cases, because it is cruder still. Cash-on-cash is the number that moves with the loan; the screen cannot see it.

How to read the output

The calculator reports three lines: the pass/fail line with the actual ratio, the rent needed for 1%, and your rent-to-price ratio. Read them in that order. The pass/fail line is a yes-or-no comparison against the convention and carries no gradation — a 1.2% property and a 1% property both simply pass. The target rent turns the convention into dollars for the price you entered, which is the quickest way to see the gap: $5,000 needed against $3,000 entered is a plainer statement than 0.6%. The ratio itself is the only continuous output, and it is the figure to carry forward if you want to compare several candidates on the same footing before running any of them in full. None of the three lines is a return, a yield, or a projection — the screen never computes one.

What the output does not do is rank, recommend, or reject. A pass means the rent-to-price ratio clears a convention; a fail means it does not. The $300,000 example above fails the screen and still shows positive cash flow on illustrative inputs; the heavy-expense version of the $220,000 example passes and shows negative cash flow. Treat the result as a reason to run — or not yet run — the full analysis, where vacancy, operating expenses, financing, and cash invested all enter.

Common misreadings

• Reading a pass as a verdict. The rule is a screen; it cannot be more than that with two inputs. The examples above show it disagreeing with the full analysis in both directions.
• Entering net rent. The convention is defined on gross scheduled monthly rent, before vacancy and before any expense. Entering rent after management fees or after a vacancy haircut lowers the ratio and measures something different from what the convention describes.
• Expecting the rule to react to the loan. It has no rate, term, or down-payment input. Cap rate is financing-independent by convention and still sees expenses; the 1% rule sees neither. Cash-on-cash is where financing enters, and only the full analysis computes it.
• Treating the display as the comparison. The on-screen ratio is rounded; the pass flag is not. At $250,000 and $2,499 the display reads 1% and the pass/fail line reads as a fail, because the unrounded ratio is 0.9996%.
• Reading the ratio as an annual yield. It is monthly gross rent over price. Multiplying by twelve gives gross annual rent as a share of price (12% at exactly 1%), which is still gross — before vacancy, expenses, and financing — and is not a cap rate.
• Assuming the entered rent is achievable. The engine uses the rent exactly as typed. It has no market data, no comparables, and no view on whether a property can command that figure.

What this model leaves out

The 1% rule calculator models a ratio and a threshold, nothing more. It takes none of the inputs the other calculators on this site take: no vacancy allowance, no operating expenses, no mortgage payment, no closing costs, and no rehab budget. It also shares every omission the methodology page lists for the site's models — income taxes, depreciation deductions, appreciation on rentals, principal paydown as a return component, PMI, financing points, rent growth on investment properties, and market cycles — and in this tool's case the list is nearly everything. It supplies no benchmark beyond the 1% convention itself, no rent estimate, and no price estimate; the only dollar figure in the output is 1% of the price you entered. The companion screen, the gross rent multiplier, shares the same omissions. When an omitted factor matters to the property in front of you, the Rental Property Calculator is where those inputs live.

Frequently asked questions

Not financial advice: a screening heuristic, not an analysis. Always run the full numbers before any offer. Values are processed locally in your browser and never transmitted. See the methodology page.