The 1% Rule Explained - Filter, Not a Buy Signal
Last updated: July 2026
The 1% rule is a blunt filter: monthly rent should be about 1% of purchase price (or your all-in cost). Pass means “worth a deeper look,” not “buy it.” Fail is common on the coasts — still run cash flow if strategy differs.
1% vs 2% vs rent-to-price
Same idea, different hurdle. Check the 1% rule calculator, the stricter 2% rule calculator, or the continuous rent-to-price ratio when you want a percent instead of a badge.
Always underwrite next
A pass with rotten expenses still loses. After the screen, run rental cash flow (and usually NOI / CoC) before you schedule the inspection.
What this guide is not
Not a national standard and not a buy signal. Gross rent ≠ collected rent.
Content last updated: July 2026. Sources & methodology
Related calculators
1 percent rule calculator
Check whether monthly rent clears 1% of purchase price.
2 percent rule calculator
Stricter rent-to-price screen: monthly rent ≥ 2% of price.
Rent to price ratio calculator
Annual rent divided by purchase price — pairs with the 1% rule.
Rental property cash flow calculator
Monthly and annual cash flow after vacancy, expenses, and debt.
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