1% Rule Calculator
Enter purchase price and monthly rent below to instantly check a deal against the 1% rule.
Clears the 1% rule -- worth a closer look, not a guarantee of real cash flow.
What Is the 1% Rule?
The 1% rule compares monthly rent to purchase price as a fast, rough screening filter -- Rent-to-Price Ratio = Monthly Rent ÷ Purchase Price, compared against 1%.
Worked example
A $150,000 property renting for $1,500/month.
Ratio = $1,500 ÷ $150,000 = 1.0% -- exactly clears the 1% rule.
The same $150,000 property renting for only $1,000/month instead:
Ratio = $1,000 ÷ $150,000 = 0.67% -- below the 1% rule, worth a closer look at whether the price or the rent is out of line with the local market.
Common mistake
Treating a property that clears the 1% rule as automatically cash-flow positive. It's a screening filter that ignores taxes, insurance, maintenance, vacancy, and debt service -- run the real numbers before deciding anything based on this alone.
Keep going
- The 1% rule and GRM are both back-of-envelope screening checks; the GRM calculator gives a second quick number to sanity-check a deal alongside the 1% rule. Gross Rent Multiplier Calculator
- The 1% rule is a rough proxy for cap rate at the moment of purchase; the cap rate calculator gives the real, expense-adjusted number once you have more deal detail. Cap Rate Calculator
Frequently Asked Questions
What is the 1% rule?
A quick screening heuristic: a rental property's monthly rent should be at least 1% of its purchase price. It's meant to filter a large list of listings down fast, not to replace a real underwriting once a property looks promising.
Does clearing the 1% rule guarantee positive cash flow?
No -- the 1% rule ignores property tax, insurance, maintenance, vacancy, and debt service entirely. A property can clear 1% and still not cash flow once real expenses are counted, especially in high-tax or high-insurance markets.
Why do many strong markets never clear 1%?
Rent-to-price ratios are generally lower in expensive, high-demand, fast-appreciating markets, and higher in cheaper, slower-appreciating ones. The 1% rule was built around certain markets and price points; it's a rough filter, not a universal law of real estate.
Is there a 2% rule too?
Some investors use a stricter 2% version of the same idea for higher-risk, lower-price markets where they want more cushion. It's the same math with a higher bar, not a fundamentally different calculation.
What should I check next if a property clears the 1% rule?
A real NOI, cap rate, and cash flow calculation with the property's actual expenses and financing -- the 1% rule earns a closer look, it doesn't replace one.
This is a neutral calculation based on the numbers you enter -- not investment advice.
Related Calculators
- Gross Rent Multiplier Calculator — Quick Screening
- Vacancy Rate Calculator — Quick Screening
- Cap Rate Calculator — Return Metrics
- NOI Calculator — Income & Cash Flow