1% Rule Calculator
Check whether a rental property's monthly rent meets the 1% rule screening heuristic.
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The 1% rule is a rough screening heuristic real estate investors use to filter deals fast: monthly rent should be at least 1% of the purchase price. A $300,000 property renting for at least $3,000 a month passes; below that, it's flagged for a closer look before investing more time.
It's not a substitute for real underwriting; it's a first-pass filter to avoid spending hours modeling a deal that was never going to work. Once a deal passes, run it through the Cap Rate Calculator or GRM Calculator for a sharper second look.
How does this calculator work?
Enter the purchase price and the monthly rent the property collects (or would collect).
The calculator divides monthly rent by purchase price to get the rent-to-price ratio, then compares that ratio directly against the 1% threshold to determine a pass or fail.
At the same time, it solves the same equation two other ways: rent needed to pass = purchase price × 1%, showing exactly how much rent would need to rise at the current price, and max price to pass = monthly rent ÷ 1%, showing the highest price that rent could still support.
All three figures update together as you change either input, so you can see immediately how much room (or how much of a gap) exists between where a deal sits and where it would need to be.
Freedom Mortgage's overview covers the same rule with additional market context if you want a second explanation.
Worked example
A $300,000 property renting for $2,500 a month.
- Rent-to-price ratio
- 0.83%
- Passes 1% rule?
- No
- Rent needed to pass at this price
- $3,000/month
- Max price to pass at this rent
- $250,000
How the numbers work
$2,500 divided by $300,000 is 0.83%, below the 1% threshold, so this deal fails the quick screen at this price and rent combination.
Either the rent would need to rise to $3,000 a month, or the purchase price would need to come down to $250,000, for the same deal to pass the rule.
Treat a failing result as a signal to dig deeper (or move on), not an automatic disqualifier; the 1% rule is a rough filter, and some strong markets or property types rarely hit 1% even on genuinely good deals. Use it to prioritize which properties are worth full underwriting in the Rental Property Calculator, not as a final decision.
1% Rule Calculator glossary
- 1% Rule
- A screening heuristic stating monthly rent should be at least 1% of the purchase price for a rental property to be worth a closer look.
- Rent-to-Price Ratio
- Monthly rent divided by purchase price, expressed as a percentage, the exact figure the 1% rule checks against a threshold.
1% Rule Calculator FAQs
Is the 1% rule realistic in every market?+
No. In many expensive coastal or high-demand metro markets, few properties hit 1%, even good long-term investments, since prices have risen faster than rents. It's a more useful filter in lower-cost markets where rent-to-price ratios run higher.
Does passing the 1% rule guarantee a good investment?+
No. It ignores expenses, vacancy, financing costs, and appreciation potential entirely. A property can pass the 1% rule and still be a poor investment after real operating costs, or fail it and still be an excellent long-term hold. Use it only as a fast initial filter, then run real numbers.
Is there a similar rule for a quicker or looser filter?+
Some investors use a 2% rule for an even stricter screen (rare outside distressed or very low-cost markets), or a 0.7-0.8% threshold as a looser bar in expensive markets. The exact cutoff is a personal or market-specific convention, not a fixed law.
Where does this rule of thumb come from?+
It's a long-standing convention among rental investors rather than an official standard, passed down through investing communities and refined market by market over time.
BiggerPockets' guide to the 1% ruleHow does this relate to cap rate or GRM?+
It's the simplest and fastest of the three screening tools, using only price and rent with no expense data needed. Cap rate and GRM give a more complete (though still simplified) picture once you have expense estimates, making them better second-pass filters after the 1% rule narrows the list.
Compare with the Cap Rate CalculatorRelated Calculators
Cap Rate Calculator
A fast net operating income over value screening tool for rental property deals.
Mortgage & Real EstateGross Rent Multiplier (GRM) Calculator
Price divided by gross annual rent, and its inverse, gross rental yield.
Mortgage & Real EstateRental Property Calculator
Full rental property pro-forma: cash flow, NPV, and before/after-tax IRR with financing, depreciation, taxes, and a hypothetical sale.