The 1% rule says monthly rent should be at least 1% of the purchase price. It is a quick filter to avoid wasting time on deals that are obviously too expensive — not a substitute for a real analysis.
Markets with high taxes, insurance or HOA dues often need more than 1%; low-cost markets may work below 1%.
Formula
1% rule ratio = Monthly rent ÷ Purchase price (expressed as a percentage)
Some investors use the 0.8% rule in expensive markets or the 2% rule in very low-cost markets. The right threshold depends on your expenses and financing.
How to calculate it
- Take the realistic monthly rent.
- Divide by the purchase price.
- Compare the result to 1% (or your market’s threshold), then run a full analysis.
Worked example
Assume a $200,000 property renting for $2,000/month with typical expenses and a 6.50% loan. Running those numbers through the RentScope engine gives:
Open the free calculator with your own numbers →
FAQ
Is the 1% rule still relevant?
It remains a useful first screen in moderate-cost markets, but rising rates and insurance costs mean many deals need more than 1% to cash flow.
What is the 2% rule?
A stricter screen used in low-cost markets. Finding 2% deals is rare in most metropolitan areas.
What should I check after the 1% rule?
Run cash flow, cap rate, DSCR and a multi-year projection before making an offer.
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