Before running full numbers through a cap rate or cash-on-cash calculator, many investors use the 1% rule as a fast first screen.
How it works
The rule states that monthly rent should be at least 1% of the purchase price. A $300,000 property needs at least $3,000 a month in rent to pass.
What this does not include
This is a rough screening tool, not a substitute for a full cash flow analysis — it ignores expenses, financing costs, and local market conditions entirely, which this site’s cap rate, cash-on-cash, and DSCR calculators are built to account for.
How to use this calculator
- Enter the purchase price and the actual or projected monthly rent.
A worked example
A $300,000 rental property charging $3,200/month: the 1% rule minimum rent is 300,000 × 0.01 = $3,000, giving a $200 margin above the threshold — a passing result.
The same property at $2,500/month: margin = −$500 — falling short of the 1% benchmark.
What the variables mean
| Variable | Meaning |
|---|---|
| Purchase price | Total property purchase price |
| Monthly rent | Expected or actual monthly rental income |
Edge cases worth knowing
The 1% rule is a quick screening tool, not a full investment analysis. It ignores taxes, insurance, maintenance, vacancy, and financing costs — a property that passes the 1% rule can still be a poor investment once those are factored in.
A purchase price of zero makes the rule meaningless, so the calculator declines to show a result for that input.
Frequently asked questions
Is the 1% rule an official standard?
No — it’s a popular investor rule of thumb, not a regulatory or lending requirement, and it should be treated as a first screen rather than a final answer.
Do properties that fail the 1% rule always make bad investments?
Not necessarily — expensive markets often see many good properties fail the 1% rule while still cash-flowing well once financing and appreciation are considered.
What’s the difference between the 1% rule and gross rent multiplier?
They’re inverses of each other — GRM checks price against rent (lower is better); the 1% rule checks rent against a price-derived minimum (passing is the goal).
