1% Rule Calculator
The 1% rule is the fastest way to triage a rental property. If monthly rent is at least 1% of the purchase price, it’s worth a deeper look. If it’s well below, the cash flow is probably too thin without serious help from financing or appreciation.
Property Details
The 1% rule says monthly rent should be at least 1% of the purchase price.
1% Rule Result
What is the 1% rule?
The 1% rule is a rental-property screen: monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for at least $2,000/month; a $400,000 property for at least $4,000/month. It’s not a guarantee of profitability — it’s a quick filter to separate plausible deals from non-starters before you spend time on a full underwrite.
The formula
Where the 1% rule still works
- Cash-flow markets: Cleveland, Memphis, Indianapolis, Birmingham, Pittsburgh, parts of the Midwest and South. Many properties still hit 1%+.
- BRRRR and value-add: apply the rule to all-in cost (purchase + rehab) on the post-rehab rent.
- Section 8 / mid-tier rentals: stable rents in working-class neighborhoods often clear 1%.
Where the 1% rule breaks down
In coastal metros and high-appreciation cities, almost no property meets 1% on the first pass. That doesn’t mean those markets are bad investments — it means you have to underwrite total return (cash flow + appreciation + principal paydown + tax benefits), not just yield. Use cap rate or cash-on-cash there instead.
Frequently asked questions
What is the 1% rule in real estate?
The 1% rule says a rental property’s monthly rent should be at least 1% of its total purchase price (price + repairs). For example, a $250,000 property should rent for at least $2,500/month. It’s a quick screening heuristic — not a final decision metric.
How is the 1% rule calculated?
Divide monthly rent by purchase price. If the result is ≥ 1%, the property passes. Formula: (Monthly Rent ÷ Purchase Price) × 100. Pass = ratio ≥ 1.0%.
Is the 1% rule still relevant in 2026?
In low-cost cash-flow markets (Cleveland, Memphis, Indianapolis, Birmingham), the 1% rule is still achievable on many properties. In higher-cost or appreciation-driven markets (NYC, SF, LA, Boston, Seattle), almost no property meets the 1% rule — investors there target appreciation and tax benefits instead. Use it as a screen for cash-flow markets, not as a universal filter.
Does the 1% rule include repair costs?
A stricter version applies the rule to total cost (purchase price + repairs/rehab). For move-in-ready rentals, purchase price alone is fine. For BRRRR or value-add deals, use the all-in cost so you don’t over-pay for the post-rehab cash flow.
What’s the difference between the 1% rule and the 2% rule?
The 2% rule is a higher-cash-flow screen for distressed or Class C/D markets — rare today. The 1% rule is the practical version for most modern investors. Use the 2% rule only if you’re looking at deeply discounted or low-priced properties where it’s realistic.
Should I buy a property that fails the 1% rule?
Possibly. Many strong investments fail the 1% rule but win on appreciation, tax benefits (depreciation, cost segregation), or principal paydown. Use the 1% rule to triage a long list — then run a full cash-flow and ROI analysis on the survivors.
What about the 50% rule and 70% rule?
They’re different screens. The 50% rule estimates operating expenses (≈ 50% of rent → NOI). The 70% rule sets a max offer for fix-and-flip deals (ARV × 70% − repairs). The 1% rule is just a rent-to-price screen.
Related calculators
Subscribe to the PropertyDNA newsletter
New calculators, fresh market data, and rental-investing guides — sent monthly.
Want a full investment analysis?
The 1% rule is a screen. PropertyDNA gives you cap rate, cash-on-cash return, DSCR, monthly cash flow, and AI-powered insights on any US address — free.
Analyze a real property