1% Rule Checker for Rental Properties
Check whether a rental property passes the 1% rule: monthly rent should be at least 1% of the purchase price.
How to use this tool
- Enter all-in purchase price and monthly rent in the fields above.
- Results update instantly as you type — or click Calculate.
- Read your rent as % of price and the full breakdown beneath it.
The 1% rule is a quick screening metric: if monthly rent is at least 1% of the purchase price, the property may generate positive cash flow. It is a screen, not a guarantee.
Formula
1% Rule Target Rent = Purchase Price × 0.01
Rent as % of Price = (Monthly Rent ÷ Purchase Price) × 100
Passes Rule: Yes if Rent as % of Price ≥ 1%, otherwise No
How it works
The 1% rule is a quick real estate investing heuristic: a rental property's monthly rent should be at least 1% of the all-in purchase price to generate adequate cash flow. This tool computes the 1% threshold, your actual rent-to-price ratio, and whether the property clears the bar.
The rule is a rough filter, not a substitute for full underwriting. It does not account for local taxes, insurance, vacancy, or financing costs. Properties in high-cost markets routinely fail the rule while still offering acceptable returns.
Worked example
Worked example
- Purchase price is $200,000 and monthly rent is $1,800.
- 1% target rent = $200,000 × 0.01 = $2,000/month.
- Actual rent as % of price = ($1,800 ÷ $200,000) × 100 = 0.9%.
- 0.9% is below the 1% threshold, so the rule is not met.
Rent-to-price ratio is 0.9% (target $2,000/month) — the property does NOT pass the 1% rule.
Key terms
- 1% rule
- A real estate heuristic stating monthly gross rent should equal at least 1% of the property's purchase price.
- All-in purchase price
- Total acquisition cost including the sale price, closing costs, and any immediate renovation expenses.
- Gross rent multiplier (GRM)
- Purchase price divided by annual gross rent; lower GRM generally indicates better cash-flow potential.
- Cash flow
- Rental income remaining after all operating expenses and mortgage payments; the ultimate measure of rental profitability.
- Cap rate
- Net Operating Income divided by property value; a more rigorous alternative to the 1% rule for comparing investments.
Frequently asked questions
- What does passing the 1% rule mean?
- Passing means monthly rent is at least 1% of the all-in purchase price. This is a rough indicator that the property could cash flow positively after expenses and a typical mortgage. Always run full numbers before buying.
- Does the 1% rule still work today?
- In many high-cost markets (coastal cities), properties rarely meet the 1% rule. Investors in these markets rely on appreciation rather than cash flow. The rule is more achievable in secondary and tertiary markets with lower prices.