A filter, not a final answer
The 1% rule exists to save time — quickly rule out properties where the rent has no realistic chance of covering costs, without building a full spreadsheet first. Anything that passes still deserves the deeper look in the Rental Property ROI Calculator.
Frequently asked questions
What is the 1% rule in real estate?
A quick screening test: monthly rent should be at least 1% of the purchase price. A $200,000 property should rent for roughly $2,000/month or more to pass.
Does passing the 1% rule guarantee a good investment?
No — it is a fast filter to rule out obviously weak deals, not a substitute for a full cash flow and cap rate analysis. See the Rental Property ROI Calculator for the full picture.
Why 1% specifically?
It is a rough historical rule of thumb balancing typical expense ratios against rent — properties clearing 1% more often cash-flow positively after mortgage, tax, insurance and maintenance.
Does this rule work in every market?
Not reliably in expensive coastal markets, where prices are high relative to rents. It is most useful as a fast first pass in mid-priced markets.
Last updated: June 2026