Deal Analysis
1% Rule Calculator
Check whether a rental deal meets the 1% rule and see the rent needed to pass.
Calculation breakdown
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How rental property returns work
The 1% rule is one of the most popular quick screens in rental property investing. It says that a deal is worth a closer look if the monthly rent is at least 1% of the total acquisition cost — the purchase price plus any rehab needed to make the unit rent-ready. The formula is simple: rent-to-price ratio = monthly rent divided by (purchase price plus rehab), times 100. If that number is 1% or higher, the property passes the screen. The rule is not a guarantee of profitability. It ignores financing, operating expenses, vacancy, taxes, and insurance. A property can pass the 1% rule and still lose money every month if expenses are high or the mortgage rate is steep. Think of it as a first filter: deals that pass deserve a full analysis with the rental property or cap rate calculator, while deals that fall well short may not be worth the time. The 1% rule works best in affordable cash-flow markets. In expensive coastal markets, properties rarely meet the 1% threshold because values are high relative to rents, yet investors still buy them for appreciation. In those markets, investors often use a lower bar — the 0.5% or 0.75% rule — to reflect the trade-off between cash flow and appreciation. If your property does not pass the 1% rule, the calculator shows the target rent you would need to meet it: the total acquisition cost multiplied by 0.01. That number tells you whether the gap is small enough to close with rent increases or whether the price is simply too high. Use the 1% rule to screen quickly, then run the full numbers before you commit.
Worked example
You are considering a duplex listed at $180,000 that needs $20,000 in rehab. Your total acquisition cost is $180,000 + $20,000 = $200,000. Market rent for similar units is $1,850 per month.
Rent-to-price ratio = $1,850 / $200,000 × 100 = 0.93%. That is below the 1% threshold, so the deal does not pass the screen.
The target rent to meet the rule is $200,000 × 0.01 = $2,000 per month. You would need to raise rent by $150 per unit or negotiate the price down to close the gap. If comparable rents top out at $1,850, the deal likely does not work unless you can buy below asking.
Frequently asked questions
What is the 1% rule in real estate?
The 1% rule says a rental property is worth a closer look if the monthly rent is at least 1% of the total acquisition cost (purchase price plus rehab). It is a quick screening tool, not a guarantee of profitability — it ignores financing, operating expenses, and market differences.
Is the 1% rule realistic in all markets?
No. The 1% rule is most achievable in affordable cash-flow markets. In expensive coastal markets, properties rarely meet the 1% threshold because values are high relative to rents. Investors in those markets often use a lower bar, such as 0.5% or 0.75%, to reflect the trade-off between cash flow and appreciation.
Does the 1% rule account for expenses and financing?
No. The 1% rule uses only monthly rent and total acquisition cost. It ignores vacancy, property taxes, insurance, maintenance, management, and the mortgage payment. A property can pass the 1% rule and still lose money. Always run a full cash flow and return analysis before deciding.
What does the target rent output mean?
Target rent is the monthly rent you would need to meet the 1% rule. It equals the total acquisition cost (purchase price plus rehab) multiplied by 0.01. If your actual rent is below target rent, the deal does not pass the screen, and the gap tells you whether it is close enough to pursue.
Should I include rehab costs in the 1% rule calculation?
Yes, if the property needs work before it can be rented. The 1% rule compares monthly rent to the total cost of acquiring a rent-ready property. If the property is turnkey and needs no rehab, rehab is zero and you simply use the purchase price.
More Deal Analysis tools
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- Cash-on-Cash Return Calculator Measure the annual return on the actual cash you put into a rental property deal.
- Rental Yield Calculator Calculate gross and net rental yield to compare income relative to property price.
- Gross Rent Multiplier Calculator Screen deals fast with the gross rent multiplier and implied price at a target GRM.
- ARV Calculator Estimate after-repair value and maximum allowable offer for a fix-and-flip or BRRRR deal.