1% Rule (Real Estate)
A quick-filter rule that says monthly rent should be at least 1% of the purchase price for a rental property to generate positive cash flow.
What is 1% Rule?
The 1% rule is a screening heuristic: a rental property passes if its gross monthly rent equals or exceeds 1% of the all-in purchase price (including acquisition costs). A $300,000 property should rent for at least $3,000/month. The rule provides a rough but fast check that the property will likely cover its mortgage and generate some positive cash flow before running detailed numbers. It originated when 30-year mortgage rates were around 5–7%. In low-rate environments, properties below 1% may still cash-flow; in high-rate environments, 1% may be insufficient. The calculator returns the actual rent-to-price percentage so you can see exactly how a deal compares to the 1% threshold.
Formula
Worked Example
2024
Source: Investopedia — 1% Rule in Real Estate (2024-01-01)
Calculate 1% Rule
Total monthly rent (all units, before any expenses)
Total acquisition cost including purchase price and closing costs
Rent-to-Price Ratio
—