1% Rule Calculator
Price & rent
Your result will appear here
Fill in the fields on the left and this updates as you type.
Know what this estimate is based on
- Jurisdiction
- United States — state and local practice
- Scope and limitations
- Educational estimate only. U.S. real estate costs are local: property tax rates, transfer and recording taxes, title practice, who customarily pays which closing cost, and landlord-tenant rules all change by state and often by county or city. Agent commission is negotiable and, since the 2024 NAR settlement, buyer-agent compensation is negotiated separately rather than assumed. Only a lender's Loan Estimate, a title company's fee sheet or a signed contract binds a number.
- Source links checked
- Jul 30, 2026
Built and regression-tested by Smart Tools Lab. It has not been individually reviewed by a licensed financial, tax, or legal professional.
How to use
- 01
Enter the purchase price, the monthly rent, and any rehab needed before renting.
- 02
Enter the mortgage payment including taxes and insurance, for the 50%-rule check.
- 03
Open Advanced options for closing costs and to change the threshold you are testing.
- 04
Read the ratio and the plain pass or fail.
- 05
Use the price table to see where the pass line actually sits, rather than trusting a single verdict.
Formula
The all-in price is the purchase price plus rehab plus closing costs. The ratio is monthly rent divided by that total, as a percentage, and it passes when it reaches the threshold you set. The rent needed to pass is the all-in price times the threshold; the highest price that passes is the rent divided by the threshold, less rehab and closing costs, which gives the purchase price you could actually offer. Gross rent multiplier is the all-in price divided by annual rent — the same relationship inverted. The 50%-rule check assumes operating costs take the stated share of rent, leaving an estimated NOI, and subtracts the mortgage payment to give an estimated cash flow. Both percentages keep their defaults, because a zero threshold passes everything and a zero expense share assumes a property with no costs.
Example
A $420,000 property renting for $2,600, with $15,000 of rehab and $8,000 of closing costs, against a $2,400 monthly payment. Step 1 — All-in price: $420,000 + $15,000 + $8,000 = $443,000. Step 2 — The ratio: $2,600 / $443,000 = 0.59%. Against a 1% threshold, it fails. Step 3 — Rent needed to pass: $4,430 a month. That is not a realistic rent for this house. Step 4 — Highest all-in price that passes: $260,000, so a purchase price of about $237,000 — nearly $200,000 below the asking price. Step 5 — The 50% rule: $2,600 x 50% = $1,300 of assumed operating costs, leaving $1,300 of NOI against a $2,400 payment. That is −$1,100 a month. So two crude screens agree, and they agree emphatically. This property does not work as a cash-flow deal at any plausible rent — it fails by a factor of nearly two. That does not automatically make it a bad purchase. It makes it an appreciation purchase, and it should be analysed with the Rental Property Total Return Calculator rather than defended with a cash-flow argument the numbers do not support. The value of a screen is that it tells you which conversation to have.
Definitions
- 1% rule
- A screen requiring monthly rent to be at least 1% of the all-in price.
- All-in price
- Purchase price plus rehab plus closing costs. The figure the screen should be applied to.
- 50% rule
- The assumption that operating expenses consume about half the rent, before the mortgage.
- Gross rent multiplier
- All-in price divided by annual rent. The same ratio inverted; lower is better.
- Gross yield
- Annual rent as a percentage of the all-in price. Roughly twelve times the 1% figure.
- Screen
- A fast filter for rejecting listings, not a basis for buying one.
- Rent-to-price ratio
- Monthly rent divided by price. What the 1% rule measures.
- 2% rule
- A stricter version of the same screen. Rarely achievable today without accepting real risk.
- Cash flow
- What remains after operating costs and the mortgage. The thing the screen is a proxy for.
- Appreciation market
- A market where returns come from price growth rather than rent, and where this screen fails by design.
- Rehab
- Work needed before the property can be rented. Part of the all-in price, not a separate item.
- PITI
- Principal, interest, taxes and insurance — the payment the 50%-rule cash flow is measured against.
Good to know
A screen built for a different interest rate
The 1% rule says monthly rent should be at least 1% of the all-in price. It exists because it approximately identifies properties where rent covers the mortgage plus expenses — but the approximation was calibrated in an era of 4% to 5% mortgage rates. At 7% the same 1% property produces materially less cash flow, which is why properties passing the rule have become scarce in most US markets while properties that cash-flow at 0.8% still exist in some. Here the property comes to 0.59% against a 1% screen: rent would need to be $4,430 instead of $2,600, or the price would need to fall to $237,000 from $443,000 all in. Those are not near misses. The rule is telling you something real about this property as a cash-flow investment, even if the specific threshold is a relic.
What the rule cannot see
It takes two inputs and therefore misses everything else. Property tax varies from under 0.5% of value in Hawaii and Alabama to over 2% in New Jersey and Illinois — a difference of $6,000 a year on this property, which no screen based on rent and price can detect. Insurance in a Florida or Gulf Coast market can be several times what the same property costs to insure in the Midwest. HOA dues, flood zones, the age of the roof, the local vacancy rate and whether the state is landlord-friendly or tenant-friendly all move the actual return and none of them appear. The rule is a filter for a list of two hundred listings, not an analysis of the three you shortlist. Applying it as a verdict rejects good properties in low-tax markets and accepts bad ones in high-tax ones.
The 50% rule is the useful companion
Pairing the 1% rule with the 50% rule turns a screen into an estimate. If half of gross rent goes to operating expenses, then $2,600 of rent leaves about $1,300 before debt service — against a $2,400 payment, that is negative $1,100 a month. The two rules together are why 1% became the threshold in the first place: at 1% of price in rent, and half of rent to expenses, the remainder historically covered a mortgage at then-prevailing rates with something left over. Working the pair backwards is the more useful exercise. It says what payment this property can support, which says what loan it can carry, which says what price makes it work — $237,000 here. That is a number you can put in an offer, which is more than the screen alone gives you.
Gross rent multiplier says the same thing more precisely
The gross rent multiplier is price divided by annual rent — 14.2 here — and it is the same relationship as the 1% rule expressed in years rather than percent. A GRM of 100 months, which is what 1% implies, is 8.3 years of gross rent to buy the property. At 14.2 years this one costs considerably more rent-years, which is exactly the 0.59% finding restated. GRM is worth knowing because it is the metric commercial brokers actually quote and because it compares more naturally across markets: a GRM of 10 in Cleveland against 20 in San Diego describes the same tradeoff between yield and growth that cap rate spreads describe, in a form that requires no expense assumptions at all. Neither metric is an analysis. Both are fast, and being fast is the point.
When failing the rule is the right answer
Plenty of good investments fail this screen, and it is worth knowing which kinds. Appreciation markets — coastal metros, supply-constrained cities, neighbourhoods with real growth — routinely price at 0.4% to 0.6% because buyers are paying for future rent rather than current rent. A property bought below market with a value-add plan fails the rule at the purchase price and passes it after the renovation and the rent reset, which is the entire BRRRR thesis. And a short-term rental generating two to three times long-term rent bears no useful relationship to a screen built on long-term rents. The rule's honest job is to tell you when a property is not a cash-flow investment. If you are buying it for something else, that answer is information rather than a rejection — provided you have priced the something else.
Frequently asked questions
What is the 1% rule?
A screen: monthly rent should be at least 1% of the all-in purchase price. A $200,000 property should rent for $2,000. It exists so an investor can reject ninety listings in an hour, not so they can buy the tenth.
Does the 1% rule still work?
As a screen, yes. As a standard, it stopped being achievable in most US metros years ago — in coastal markets almost nothing clears it, and investors there buy for appreciation instead. In cheaper markets plenty clears it and many of those properties still lose money.
Should the price include rehab and closing costs?
Yes, and most people skip it. A $180,000 house needing $40,000 of work is a $220,000 property, and rent has to cover the whole thing. Screening on the purchase price alone flatters exactly the deals that need the most scrutiny.
What is the 50% rule?
The assumption that operating expenses — everything except the mortgage — consume about half the rent over the long run. It is crude and surprisingly durable, because the things people forget to budget for tend to fill the gap.
What is gross rent multiplier?
The all-in price divided by annual rent. It is the same ratio inverted: a 1% rule property has a GRM of about 8.3. Commercial listings quote GRM more often than the 1% rule, and lower is better.
Why does the rule fail in expensive markets?
Because prices there are set by owner-occupiers and by expectations of growth, not by rental income. A $900,000 house does not rent for $9,000, and nobody expects it to — the return comes from appreciation, which this screen cannot see.
Is a property that passes automatically good?
No. Clearing 1% says nothing about the roof, the neighbourhood, the property tax rate or whether the rent is achievable. Cheap markets throw up plenty of 1.5% properties that lose money once vacancy, management and a genuine repair budget are counted.
What threshold should I use today?
Many investors have moved to 0.8% or even 0.7% in higher-priced markets, treating 1% as a legacy figure. The threshold is a field on this page for exactly that reason — set it to what your own market supports and use it consistently.
How does this compare with cap rate?
The 1% rule takes seconds and ignores every expense. Cap rate takes ten minutes and counts them. Use this to decide what is worth ten minutes, and cap rate to decide what is worth an offer.
Does it work for short-term rentals?
Poorly. Short-term gross revenue can be double the long-term rent while expenses are several times higher — cleaning, furnishing, platform fees, higher turnover. Applying a long-term screen to short-term income produces a number that means nothing.
What is the 2% rule?
The same screen at a stricter threshold, which used to be achievable in low-cost markets. Properties clearing 2% today are almost always in areas with real problems — declining population, high crime, or a housing stock at the end of its life.
If nothing in my market passes, what then?
Lower the threshold to what the market actually supports and use the screen relatively rather than absolutely — the best 0.7% property in a market where everything is 0.55% is still the best. Or accept that the return will come from appreciation and analyse it that way.