1% Rule Calculator

The 1% rule is a quick screening tool for rental investors. It states that monthly rent should be at least 1% of purchase price for positive cash flow potential. While simple, it quickly filters out overpriced properties.

This calculator checks if a property meets the 1% threshold by comparing monthly rent to purchase price. Properties meeting or exceeding 1% warrant further analysis; those falling short may struggle to generate positive cash flow.

The 1% rule is a starting point, not a final verdict. Many excellent investments don't meet 1% in high-appreciation markets. Use it to prioritize which properties deserve deeper analysis.

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How to Use This Calculator

1 Enter the property purchase price (or asking price)
2 Enter expected monthly rent
3 Click Calculate to see the rent-to-price ratio
4 Compare to 1% threshold for quick screening
5 Properties meeting 1% warrant further analysis

Formula

Ratio = (Monthly Rent ÷ Purchase Price) × 100
Pass if ≥ 1%

Example Calculation

Screening a $200,000 property renting for $1,800/month

Inputs:

Purchase Price: $200,000
Monthly Rent: $1,800

Result:

Ratio = $1,800 ÷ $200,000 = 0.9% — Does not meet 1% rule

Pro Tips

1% is a screening tool, not a guarantee
High-growth markets rarely hit 1%
Combine with cap rate and cash flow analysis

Important Considerations

• Commercial properties typically don't use the 1% rule
• HCOL markets rarely meet 1%—adjust expectations accordingly
• Properties significantly exceeding 1% may have hidden issues

Frequently Asked Questions

The 1% rule states monthly rent should be at least 1% of purchase price. A $150,000 property should rent for $1,500+/month. It's a quick screening tool to identify properties likely to cash flow positively.

Not necessarily. Many great properties in high-appreciation markets don't meet 1%. Coastal cities, strong job markets, and Class A properties often trade at 0.6-0.8%. The trade-off is typically more appreciation potential and lower risk.

Midwest cities (Cleveland, Indianapolis, Memphis), some Southern markets, and smaller metros often have 1%+ properties. However, these may come with higher management intensity, slower appreciation, and tenant quality challenges.

Yes. Calculate using total investment (purchase + rehab). A $100,000 property needing $30,000 in work should be evaluated at $130,000 total. The after-repair rent should meet 1% of total investment.