The 1% Rule Calculator
Check a rental against the 1% rule, the fast screen where monthly rent should be at least 1 percent of the all-in cost.
Want to understand the concept, not just the number? Read The Real Estate Investing Guide and more below.
How it's calculated
The 1% rule is the fastest screen in rental investing. It says the monthly rent should be at least 1 percent of the all-in cost, which is the purchase price plus any upfront repairs. Hit 1 percent and the deal is worth a closer look. Fall well short and it will likely struggle to cash flow once the mortgage and expenses are in. It is a filter for sorting a long list of listings, not a verdict.
Take the default. A $300,000 property renting for $2,500 a month has a rent-to-price ratio of 0.83 percent, below the 1 percent line. To pass, it would need to rent for $3,000 a month. The same property viewed as a yield brings in $30,000 a year against a $300,000 cost, a 10 percent gross yield before any expenses. That gross yield is the annual twin of the monthly 1 percent test, since 1 percent a month is 12 percent a year.
The rule travels poorly across markets. In cheaper areas, properties that clear 1 percent are common, and in expensive coastal cities almost nothing does, yet people still invest there for appreciation. Use it to compare similar properties in one market and to throw out the obvious non-starters quickly, then run the Rental Property ROI and Rental Cash Flow calculators on the survivors to see whether they actually pay.
Assumptions
- The rent-to-price ratio is monthly rent divided by the all-in cost, which is the purchase price plus any upfront repairs. A property passes at 1 percent or more.
- This is a rough screen, not a full analysis. It ignores the mortgage, taxes, insurance, and every other expense, so a pass still needs a real cash-flow check.
Last updated: 2026-08-08
These assumptions follow our general methodology.
Frequently asked questions
What is the 1% rule in real estate?
It is a quick screen that says a rental property monthly rent should be at least 1 percent of its all-in cost. A $200,000 property should rent for about $2,000 a month to pass. It is a first filter, not a full analysis, and it says nothing about your specific mortgage or expenses.
Is the 1% rule still realistic?
In many high-price markets, very few properties meet it, so investors there lean on appreciation instead. In cheaper markets it is still a useful bar. Treat it as a way to compare similar deals and screen out weak ones, not as a rule that must always be met.
What is the difference between the 1% rule and the 2% rule?
They are the same idea at different thresholds. The 2% rule asks for rent of at least 2 percent of the cost, which is far harder to find and usually only appears in low-price, higher-risk areas. The 1% rule is the more common and more attainable screen.
Does passing the 1% rule mean a property cash flows?
Not on its own. The rule ignores the mortgage, taxes, insurance, maintenance, and management. A property can pass and still lose money each month at a high rate, or fail and still work with a large down payment. Always follow a pass with a real cash-flow analysis.