Rent-to-value calculator (the 1% rule)

What is the 1% rule in real estate?

The 1% rule is a quick screening tool used by rental property investors. It says that a property's monthly rent should be at least 1% of its purchase price. A $200,000 property should rent for at least $2,000/month. If it does, the deal is worth analyzing further. If it does not, it will likely be hard to cash flow.

The 1% rule is a starting point, not a final answer. A property that hits 1% might still lose money if taxes are high or maintenance costs are above average. And a property at 0.8% might still be a great investment if it is in an appreciating market with low expenses. Use this calculator for the first filter, then run a full analysis with the rental property calculator for deals that pass.

Is the 1% rule still realistic?

In many markets, especially coastal and high-demand cities, hitting 1% is nearly impossible with current prices. In those areas, investors adjust their expectations to 0.7-0.8% and rely more on appreciation. In the Midwest, South, and smaller metro areas, 1% or better is still very achievable.

The rule was created when interest rates were lower and property prices were more moderate. It still works as a relative comparison tool. If one property is at 0.6% and another is at 0.9%, the second is clearly the stronger cash flow play, even if neither hits the full 1%.

A property that passes the 1% rule is worth analyzing further with our rental property calculator to see actual cash flow, cap rate, and DSCR. For a quick look at the financing side, the mortgage calculator shows your exact monthly payment.