1 Percent Rule Real Estate Calculator

The example is a property that passes exactly: $2,650 rent on a $265,000 price. Run it through the full model at 25% down and 6.75% money and it produces $320 a month of cash flow, a 1.25 DSCR and a 4.75% cash-on-cash return. Real, but not much margin for a bad tenant.

That is the honest calibration of the rule at current rates. It is a filter that admits marginal deals, not a guarantee of good ones. Which is fine — as long as you know that passing the filter is the beginning of the work rather than the end of it.

It has one genuine job: reducing a hundred listings to five worth reading properly. For that it is excellent. It needs two numbers that are both on the listing page, it takes two seconds, and it is roughly right about which properties are priced for investors and which are priced for owner-occupiers.

• Use it to sort a market. Rank everything by rent-to-price, then underwrite the top of the list.
• Use all-in cost, not price. A property at 1.00% on price and 0.97% on all-in cost is a different deal from one at 1.00% needing nothing.
• Do not use it across markets. A 1.2% property in a high-tax county can net less than a 0.9% property in a low-tax one.
• Never use it to decide. Passing means underwrite; it does not mean buy.

What is the 1 percent rule in real estate?

A property passes the 1% rule if its gross monthly rent is at least 1% of the purchase price. A $265,000 property needs $2,650 a month. It is a screening filter, not a measure of profit: it tells you whether a deal is worth underwriting properly, and nothing else.

Does the 1 percent rule still work?

It works as a filter but its calibration is stale. The rule spread when 30-year investor money cost 5% to 6%; at 6.75% a property that passes 1% exactly produces about $320 a month with a 1.25 DSCR, which is thin. The equivalent screen at 2026 rates is closer to 1.1%, and above 8% money it needs to be higher still.

Should rehab be included in the 1 percent rule?

Yes, if you want the answer to mean anything. Rent against purchase price alone ignores the money required to make the unit rentable. The example here passes at exactly 1.00% on price and 0.97% on all-in cost including $8,000 of rehab — the second number is the one that predicts your returns.

What is the 2 percent rule?

The same test at a 2% threshold — $2,650 a month would require a purchase price of $132,500. Properties clearing 2% exist, but they are concentrated in markets with low prices for a reason: higher vacancy, higher turnover, higher maintenance and weak or negative appreciation. A 2% property is not twice as good as a 1% property.

Why does the 1 percent rule ignore expenses?

Because it is built to be done in your head from a listing. That is its entire advantage and its entire weakness. Two properties can both hit exactly 1% while one pays $3,420 a year in property tax and the other pays $9,000 — and only one of them makes money.

The expense-side companion to this filter is the 50% rule, and the flipping equivalent is the 70% rule. When a property passes, take it to the rental property calculator and underwrite it properly.