1% Rule Calculator
Test rental properties against the 1% rule: monthly rent should be at least 1% of purchase price. Also calculates the 2% rule and gross rent multiplier.
Reviewed for accuracy by Marcus Webb and the Blueprint Dynamics editorial team (last updated July 2026). Our calculators use primary-source formulas and are cross-checked against IRS publications, Fannie Mae guidelines, and Federal Reserve data. Learn more about our methodology.
Monthly rent ÷ purchase price ≥ 1% = passes the 1% rule
Does NOT pass the 1% rule
0.90%
Rent-to-price ratio • Target: ≥1.00%
To pass, rent needs to be $2,000/mo or price needs to be $180,000 or less.
What the 1% rule is and how to apply it
The 1% rule is a quick screening heuristic for rental property investment: monthly rent should equal at least 1% of the all-in purchase price (purchase + closing costs + any immediate repairs). A $200,000 property should rent for at least $2,000/month to pass. A $350,000 property needs $3,500/month in rent. The rule provides a fast filter to eliminate properties with obviously unfavorable economics before investing time in detailed analysis. Properties that pass the 1% threshold are more likely to generate positive cash flow after expenses, debt service, and vacancy.
Why the 1% rule approximates cash flow potential
The rule works as a rough cash flow indicator because a property generating 1% monthly gross rent relative to price tends to have enough income to cover operating expenses (typically 40–50% of gross rents using the 50% rule of thumb) and leave room for debt service. On a $200,000 property at 1%: gross monthly rent $2,000. Expenses at 50%: $1,000. NOI: $1,000. Mortgage at 7%, 20% down ($160,000 loan): $1,065/month. Cash flow: approximately −$65/month. The rule doesn't guarantee positive cash flow, but properties significantly below 1% (0.5–0.6%) almost certainly produce negative cash flow at today's interest rates.
The 1% rule in different markets
In high-cost-of-living markets (San Francisco, New York, Seattle, Los Angeles), achieving 1% is frequently impossible — properties there often yield only 0.3–0.5% in gross rent-to-price ratio. Investors in these markets accept thin or negative cash flow and bet on appreciation. In secondary and tertiary markets (Midwest, Southeast, parts of the South), the 1% rule is routinely achievable and some properties exceed 1.5–2%. The 1% rule is most useful for markets where it's reasonably achievable; in gateway cities, investors use different frameworks — cap rate, price-to-rent ratio, or appreciation projections — instead.
The 1% rule as a starting point, not a decision
The 1% rule is a filter, not a full analysis. A property can pass the 1% test and still be a poor investment due to: high property taxes that consume NOI, major deferred maintenance creating large CapEx costs, unfavorable local rental market (high vacancy), or problematic location that attracts difficult tenants or limits rental demand. Passing the 1% threshold means a property is worth analyzing further — it does not mean buy. Always run a complete rental property analysis including vacancy rate, operating expenses, CapEx reserves, property management, taxes, insurance, and actual debt service before committing.