What Is the 1% Rule?
Monthly rent should be at least 1% of the purchase price. Buy at $200,000? Rent should be $2,000/month. This is a screening filter, not a hard law.
How to Apply It
When browsing listings, do the math immediately. If area rents fall short, the property likely will not cash flow without value-add work.
When It Works Best
- Markets with lower property values and strong rental demand
- Multi-family properties (duplexes, triplexes)
- Properties needing cosmetic rehab
When to Break It
In expensive markets, few properties hit 1%. You may prioritize appreciation over cash flow, or use house hacking.
Beyond the 1% Rule
Run full numbers: mortgage, taxes, insurance, vacancy (8-10%), maintenance (10%), management (8-10%), and CapEx reserves.
Learn the complete process in our First Property Playbook or download the Deal Analysis Spreadsheet.