1% Rule Calculator
The ten-second screen: does the monthly rent reach 1% of the purchase price? Enter both numbers and see the target rent, your actual ratio, and the verdict.
Rent-to-price screen
Example: $220,000 price needs $2,200 rent — $2,200 passes at exactly 1%.
A pass and a fail, side by side
A $220,000 property renting for $2,200 sits at exactly 1% — a pass, and not coincidentally the same property that clears positive cash flow in our Rental Property Calculator example. A $300,000 property renting for $2,500 manages only 0.83% against a $3,000 target — and at 20% down and 7%, that deal's margin is thin enough that realistic expenses typically push it cash-flow negative. The screen and the full analysis usually agree; the screen just takes ten seconds. Both figures are computed by the same tested engine as the calculator above.
Why such a crude ratio works
Rent-to-price is a compressed cap rate. Operating expenses tend to scale with rent, and financing costs scale with price — so when rent clears 1% of price monthly (12% annually, gross), enough typically survives expenses and the mortgage to cash-flow. When it doesn't, the margin has to come from somewhere else: appreciation hopes, unusually low taxes, or your own unpaid labor. The rule's power is making that conversation happen before you fall in love with a property.
Frequently asked questions
What does the 1% rule actually claim?
That a rental whose monthly rent is at least 1% of its purchase price is worth analyzing further — historically, deals at that ratio have tended to cover their costs with room for profit. It is a screen, not a verdict: it says "look closer," never "buy."
Is the 1% rule still realistic?
In many high-priced coastal markets, almost nothing passes — a $600,000 house rarely rents for $6,000. That does not make the rule useless; it tells you those markets price on appreciation rather than cash flow. Cash-flow investors respond by shopping different markets, not by lowering the bar and calling losses "investments."
What about the 2% rule I have heard of?
A stricter version from an era of cheaper properties — rent at 2% of price, mostly seen today in low-price markets and rougher neighborhoods where higher yields compensate for higher risk and management burden. Same logic, higher threshold.
What should I run after a property passes?
The full analysis: financing, vacancy, real operating expenses, cash flow, cash-on-cash, and cap rate. A pass on the 1% rule with high property taxes or an old roof can still be a bad deal — the Rental Property Calculator is the next step.
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.