RealInvestorX
Rental deal math
The 1% rule: a fast screen for rental properties
The 1% rule is a screening shortcut: monthly rent should be at least 1% of the purchase price. It filters listings quickly, but it is not a substitute for full underwriting.
The formula
Monthly rent >= 1% x purchase priceWorked example
- Price $200,000: the target rent is 1% x $200,000 = $2,000 a month.
- Rent of $1,800 is 0.90% of price, so it fails the screen.
- Rent of $2,000 is 1.00% of price, so it passes.
Illustrative inputs for learning, not market data or a forecast. Replace every number with figures from your own deal.
How to use it
Taxes, insurance, repair needs and interest rates differ by market, so a property can pass and still lose money, or fail and still work. Use the rule to decide what to look at, then run the full numbers.
Frequently asked questions
Is the 1% rule realistic today?
It depends on the market and on interest rates. In many areas few listings meet it, so treat it as a screen, not a requirement.
What is the 2% rule?
The same idea with a 2% threshold, a stricter screen that is rarely met outside low-priced markets.
Does the 1% rule include expenses?
No. It compares gross rent with price only, which is why it can mislead.