1% Rule Calculator
Test whether a rental's monthly rent clears the 1% rule of thumb.
Details
Rent as a share of price
1.05%
Max price at this rent
$210,000
GRM
7.9
This checks a rental against the 1% rule: whether monthly rent reaches 1% of the purchase price.
It gives the rent a property would need to pass, and the actual percentage it achieves.
The 1% rule for rental property
The 1% rule says a rental should bring in monthly rent of at least 1% of the purchase price. A $150,000 property needs $1,500 a month.
It exists as a five-second filter. Investors scanning dozens of listings use it to decide which two or three are worth a proper analysis, not to decide what to buy.
It is worth being blunt about its current state: in most US metros, almost nothing passes. Prices have risen faster than rents for years. That does not make the rule useless, but it does change how you use it, from a pass-or-fail test into a way of ranking listings against each other.
The demand scales exactly with price, which is why the rule is much easier to meet in low-cost markets. Very few $400,000 homes rent for $4,000.
What to enter
- Purchase price
- The price you would pay. Some investors add renovation costs, which makes the test stricter and more honest.
- Monthly rent
- Realistic market rent, from comparable listings rather than from what you would like to charge.
The rule and its relatives
- 1% rule
- Monthly rent at 1% of price. The common screen, and increasingly hard to meet.
- 2% rule
- The older, stricter version. Effectively extinct outside distressed properties in low-cost markets.
- [Gross rent multiplier](/real-estate/gross-rent-multiplier-calculator)
- The same relationship expressed annually. The 1% rule is exactly a GRM of 8.33.
- 50% rule
- A companion rule of thumb: assume operating expenses eat about half the rent before the mortgage.
What this assumes
Expenses, financing and location quality are all ignored. Two properties that both pass can perform very differently.
The rule was popularised when both prices and interest rates were far lower. It has not been adjusted for either.
How to calculate whether a rental passes the 1% rule
Divide rent by price, or multiply price by 1% to get the rent required.
- monthly rent
- Market rent, not the current tenant's rent if it is below market
- purchase price
- Price, ideally plus any immediate renovation
Find realistic market rent. Check comparable rentals in the same area and condition. An optimistic rent makes any property pass.
Divide by the price. Multiply by 100 for the percentage. 0.75% and 1.1% tell you something useful; the exact 1% line does not.
Rank rather than pass or fail. In most markets nothing hits 1%, so the useful question is which listings come closest.
Run real numbers on the leaders. The rule ignores taxes, insurance, maintenance and financing. Move to cap rate and full cash flow before making an offer.
See a worked example: the same rent against two different prices
- Property A
- $150,000, rents for $1,500
- Property B
- $400,000, rents for $2,500
A: $1,500 ÷ $150,000 = 1.0%. It passes exactly.
B: $2,500 ÷ $400,000 = 0.625%. To pass it would need $4,000 a month.
A also equals a gross rent multiplier of 8.33, since $150,000 ÷ $18,000 of annual rent is 8.33.
This is the usual pattern: cheaper markets pass more easily, expensive ones almost never do, and buyers there are relying on appreciation instead.
1.0% passes, 0.625% does not
Frequently asked questions
In most US metros, no. Prices have outpaced rents for years and very few listings reach 1% without being in a low-cost market or needing significant work.
Investors have largely adapted by using it comparatively. A property at 0.8% in a market where everything else is at 0.6% is genuinely interesting, even though it fails the rule outright.
The same idea at double the threshold: $3,000 a month on a $150,000 property. It was a realistic screen in some markets decades ago.
Today it effectively does not exist outside distressed properties in the cheapest markets, and a listing that appears to hit it usually has a reason, such as heavy deferred maintenance or a very weak area.
Not necessarily. The rule sees only rent and price. It cannot see property taxes, insurance, maintenance, management or the mortgage.
A property in a high-tax state with an old roof can pass comfortably and still produce negative cash flow. The rule shortlists; it does not decide.
They are the same relationship, expressed differently. 1% monthly rent is 12% of the price annually, and price divided by that annual rent gives a GRM of 8.33.
So a property passing the 1% rule always has a GRM of 8.33 or lower. If you already use GRM, the 1% rule adds nothing new.
Yes, if you plan to spend the money before renting it out. A $150,000 purchase needing $30,000 of work is really a $180,000 investment, which needs $1,800 a month to pass.
Screening on the purchase price alone makes fixer-uppers look far better than they are, which is exactly the error the rule is supposed to help you avoid.
Problems people actually run into
Treating a pass as an answer
Properties that pass the 1% rule in expensive markets have usually passed for a reason, and it is rarely a good one: a declining area, heavy repairs, or unusually high taxes.
The rule flags candidates. Every one still needs full expense and financing numbers before it deserves an offer.
Using aspirational rent
Slightly overestimating rent is the easiest way to make a marginal property pass, and it is very easy to do without noticing.
Use comparable rentals that are actually let, not asking prices on listings that have sat for weeks. A $100 optimism on a $150,000 property is the whole difference between 0.93% and 1%.
Results are estimates for general information only and are not professional financial, medical, or legal advice. Read our full disclaimer.
Last updated: September 4, 2026