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1% rule calculator

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1% rule checker
Monthly rent should be ≥ 1% of purchase price.
Rent-to-price
Hits the rule
1.00%
Rent needed to hit 1%: $1,650
Rule of thumb: Old-school filter, not a verdict. A $150k house should rent for $1,500+ to cash flow under normal conditions. It's a screen, not a green light.

The 1% rule is a thirty-second filter, not a verdict. It asks one thing: does the monthly rent come to at least 1% of the purchase price? If it does not, the deal usually needs something else going for it.

How the 1% rule works

Divide the monthly rent by the purchase price and turn it into a percentage. A $165,000 house renting for $1,650 lands on exactly 1.00%. The same house renting for $1,200 lands on 0.73%, and the rule says keep looking.

It is a screen, and that is all it is. It has no expenses in it, no financing, no taxes, and no vacancy. What it does is let you throw out most of a listing page in a few minutes so the properties that survive get the real analysis: cap rate, then cash-on-cash return.

  • Rent-to-price = monthly rent divided by purchase price, as a percentage
  • Rent needed for 1% = purchase price divided by 100
  • Passing is permission to analyse, never permission to buy
A two-story craftsman house with bicycles on the front porch

Where the rule holds and where it does not

The 1% rule was built in and for markets where prices track rents fairly closely. In expensive metros, almost nothing hits 1% and investors there buy for appreciation and tax treatment instead. In cheaper markets, plenty of properties clear 1% and some clear 2%, usually because the expense load, turnover, or management difficulty is higher than the price suggests.

So a property missing 1% is not automatically a bad buy, and a property clearing it comfortably is not automatically a good one. When something is well above the rule, treat that as a question rather than a green light: what does the market know about this building that the rent number is quietly telling you?

What to do with the properties that pass

Rebuild the deal properly. Get the real property tax figure rather than the seller's, get an insurance quote for that specific address, put a vacancy allowance in, and put a maintenance allowance in. Then run the cap rate to see how the building performs on its own, and the cash-on-cash return to see what your own money is earning after the loan.

The rule's only job is to decide what deserves that half hour. It is very good at that job and completely unqualified for anything after it.

A woman on the sidewalk looking at a house she rents out

A worked example

A house listed at $165,000 that comparable homes nearby rent for around $1,650 a month.

Purchase price
$165,000
Monthly rent
$1,650
Rent needed to hit 1%
$1,650
Rent-to-price1.00%

Drop the achievable rent to $1,400 and the same house reads 0.85%, which is the point where it needs appreciation, a rent increase you can actually justify, or a lower price to make sense.

Common questions

Is the 1% rule still realistic?
It depends entirely on the market. In lower-priced markets properties still clear it regularly. In expensive metros very little does, and investors there are buying for appreciation rather than monthly cash flow. The rule has not stopped working; it has always been a market-specific filter that some markets simply never satisfied.
Should I use asking price or what I would actually pay?
Use the price you would realistically pay, including any repairs needed before it can be rented. Running the rule on an asking price you have no intention of paying tells you about the listing rather than about your deal.
What is the 2% rule?
The same calculation with a higher bar: monthly rent of at least 2% of the purchase price. Properties that clear it are usually in low-priced markets and generally carry higher expenses, more turnover, and harder management than the headline number implies.
Does the 1% rule work for renting by the room?
It works if you add up all the room rents for one property and compare that total to the price of the whole property. Rent by the bedroom usually pushes the rent-to-price ratio well above 1%, which is the point of the model, but it also comes with more turnover and more management, and the rule cannot see either of those.

These calculators are educational and are not legal, tax, lending, or accounting advice. Rules vary by state and by city, and your lease governs your own properties. Check your own requirements before relying on any number here.

Stop doing this by hand

RentCaddie does this math on every lease, automatically.

Rent charges post themselves, prorated move-in months are calculated and itemised, late fees apply by the rule you set, and the books reconcile.Free until your first rent lands.

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