The 1% rule is the fastest screen in real estate investing. Before you underwrite a deal, run one division: will the monthly rent you can charge equal at least one percent of the purchase price? If the answer is no, the property almost certainly will not cash flow, and you can move on without wasting an afternoon on spreadsheets. This one percent rule calculator does that division for you instantly, then shows your rent-to-price ratio, your monthly surplus or shortfall against the target, and a clear pass or fail verdict.
Type in the purchase price and the realistic rent a tenant would pay, and the result card updates on the spot. You can also slide the threshold up to the 2% rule for a stricter, more conservative screen.
How to Use
- Enter the Property Purchase Price — the amount you would actually pay the seller, after negotiation and before closing costs.
- Enter the Expected Monthly Rent. Pull this from comparable listings (Zillow, Apartments.com, or a local property manager), not from what you hope a unit might rent for.
- Set the Rule Threshold. The default is 1%, the classic screen. Raise it to 2% to apply the stricter 2% rule, or to 0.5% to model a more forgiving market.
- Read the result card: the Required Monthly Rent tells you the minimum rent the screen demands, the Rent as % of Purchase Price shows where the deal actually lands, and the Result line says PASS or FAIL.
- Use the Monthly Surplus / Shortfall line to judge how comfortably the deal passes — a $50 cushion is very different from a $800 cushion.
The rule is a filter, not a decision. It tells you which deals are worth a deeper look; it does not account for mortgage, taxes, insurance, vacancies, or repairs.
The Formula Behind the Screen
The math is deliberately simple:
Required Monthly Rent = Purchase Price × Rule %
So on a $300,000 house at the standard 1% screen, the target rent is:
$300,000 × 1% = $3,000 per month
If realistic market rent is $2,200, the ratio is $2,200 ÷ $300,000 = 0.73%, and the deal fails the 1% rule by $800 per month. Flip it around: a property that rents for $3,000 against a $300,000 price hits exactly 1.0% and passes right at the line.
The companion 2% rule doubles the threshold. On the same $300,000 house, the 2% rule demands $6,000 per month — a bar that is reachable mainly in lower-priced, high-rent markets, and a useful stress test for aggressive cash-flow expectations.
Examples
Example 1 — The textbook fail. An investor looks at a $300,000 duplex. Comparable units rent for $2,200 a month combined. The 1% rule requires $3,000, so the property shows a shortfall of $800 per month and a rent-to-price ratio of just 0.73%. The screen says FAIL — before any mortgage or expense, the rent cannot even cover the one-percent benchmark.
Example 2 — Passing at the line. A small multifamily property is listed at $300,000 and reliably rents for $3,000 a month. The target is $3,000, the surplus is $0, and the ratio is exactly 1.00%. It passes the 1% rule, but with zero cushion — a single vacancy month or a surprise repair could tip it negative, so it deserves a closer underwriting look.
Example 3 — The 2% rule variant. In a lower-cost market, a $150,000 single family rents for $3,000 a month. Against the 1% screen it crushes the target (ratio 2.0%), and even the stricter 2% rule, which demands $3,000, is met exactly. This is the kind of cash-flow deal the rule was built to surface.
Example 4 — A million-dollar stress test. On a $1,200,000 apartment building renting for $12,000 a month, the 1% target is $12,000 and the ratio is 1.0%. The calculator handles seven-figure prices without rounding errors, so you can screen commercial-scale deals the same way.
FAQ
What is the 1% rule in real estate?
The 1% rule is a quick screening heuristic: a rental property's monthly rent should equal at least 1% of its total purchase price. On a $250,000 home, that means rent of at least $2,500 per month. It is designed to quickly reject deals that will not cash flow before you spend time on a full analysis.
How do I calculate the 1% rule?
Multiply the purchase price by 1%. The result is the minimum monthly rent the property should command. If realistic rent meets or exceeds that number, it passes the screen; if it falls short, it fails. This calculator performs that multiplication and also shows your rent-to-price ratio and monthly surplus or shortfall.
Is the 1% rule accurate?
It is a rough filter, not a guarantee. The rule ignores mortgage rates, property taxes, insurance, HOA dues, vacancies, maintenance, and management fees. A property that passes 1% can still lose money, and in very expensive coastal markets almost nothing passes 1% — which is why many investors there use appreciation and rent growth instead of cash-flow screens.
What is the 2% rule?
The 2% rule is a stricter variant: monthly rent should equal at least 2% of the purchase price. On a $200,000 property that means $4,000 a month. It is far harder to satisfy and is used mainly in low-cost, high-rent markets to identify exceptional cash-flow deals. Set the Rule Threshold to 2 in this calculator to test against it.
What is a good rent-to-price ratio?
A rent-to-price ratio of 1% or higher is the classic passing benchmark. Between 0.8% and 1.0% is marginal and needs careful underwriting, and below 0.8% usually signals weak cash flow. Remember the ratio is gross rent before expenses — net cash flow is always lower.
Does the 1% rule apply to home prices over $1 million?
Yes, the arithmetic scales linearly: a $1,200,000 property needs $12,000 a month to hit 1%. In practice, million-dollar-plus buildings rarely reach 1% because higher prices outpace rent, so investors there typically evaluate cap rate and cash-on-cash return rather than the 1% screen.
Disclaimer
This one percent rule calculator is provided for informational purposes only and does not constitute financial, investment, tax, or legal advice. The 1% and 2% figures are rough screening heuristics based solely on the price and rent you enter; they ignore mortgage debt, property tax, insurance, vacancies, maintenance, and HOA costs. Actual returns vary by market, financing, and condition. Always underwrite a deal in full and consult a qualified real estate or tax professional before purchasing an investment property.