The 30-second screen for rental deals: does the monthly rent clear 1% of the price? Enter two numbers and find out.
Gross monthly rent you expect to collect.
The price you'd pay for the property.
Add rehab to test against total all-in cost. Leave at 0 for the classic price-only rule.
Rent-to-Price Ratio
1.00%
Clears the screen — worth a full analysis. Remember the rule ignores expenses, financing, and condition, so passing here means 'analyze it', not 'buy it'.
The 1% rule: monthly rent ÷ total cost ≥ 1.0%.
Rent held fixed, purchase price varied. Where the line crosses below the band, the deal stops passing the 1% rule. The amber dot is your numbers.
For informational purposes only. Computed from the data you provide; not investment, tax, or financial advice. Consult a qualified advisor before acting on any figure.
The 1% rule tells you what to analyze; Keystone IQ tracks what you own. Live NOI, cap rate, cash flow, and equity for every property, refreshed every page load — so the deals that pass the screen stay healthy after you close.
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The 1% rule is a quick screen real estate investors use to decide whether a rental property is worth analyzing in detail. The rule: a property's monthly rent should be at least 1% of its purchase price (some investors use total cost — price plus rehab). A $200,000 house renting for $2,000 a month hits exactly 1%; renting for $1,500 it's at 0.75% and fails the screen.
It exists because investors look at a lot of deals and can't run a full analysis on every one. The 1% rule is a five-second filter: clear it and the property goes in the "analyze further" pile; miss it badly and it usually isn't worth the time unless something unusual is going on.
Use it as a first-pass filter, not a decision. A property that passes still needs a real analysis — cap rate, cash-on-cash return, and a look at the actual expenses, financing, and condition — before it's a deal. A property that fails the 1% rule isn't automatically bad either; in appreciation-heavy markets, almost nothing clears 1%, and investors there buy for value growth, not day-one cash flow.
The most practical use is on the buy side: fix the rent at what the property realistically commands, then find the highest price that still clears 1%. That number is a sane upper bound for your offer. The chart above does exactly this — hold your rent, slide the price, and watch where the line drops below the passing band.
The rule's strength — simplicity — is also its weakness. It completely ignores operating expenses, which vary enormously: two properties at the same 1% ratio can have wildly different cash flow if one has high taxes, old systems, or an HOA. It ignores financing, so it says nothing about whether the property covers its mortgage (that's DSCR) or what return you earn on your cash (that's cash-on-cash). And it ignores condition and vacancy risk.
Treat 1% as a triage tool. Once a property clears it, move to the metrics that account for the things the rule leaves out: cap rate to compare it against other deals, cash-on-cash to measure your actual return after financing, and DSCR if you're getting a loan.
It's gotten harder. In many appreciation-driven metros, very few properties clear 1% — investors there accept lower cash flow for value growth. In lower-cost and Midwest/Southeast markets, 1% (and occasionally more) is still achievable. Use the rule as a relative screen within a market rather than a universal pass/fail; what clears 1% in one city would be a screaming deal in another.
Both are used. The classic version is rent vs purchase price. The more conservative version is rent vs total all-in cost (price + rehab + closing), which better reflects what you actually put into the deal — especially for a fixer-upper. This calculator lets you add rehab so you can run either; leave rehab at 0 for the classic price-only rule.
Same idea, higher bar: the 2% rule wants monthly rent at 2% of price. It was a rule of thumb for cash-flow-heavy, higher-risk markets and is rarely achievable today outside lower-cost areas — and a 2%+ ratio often signals a rougher neighborhood or maintenance-heavy property, so it warrants extra scrutiny rather than excitement.
No. The 1% rule ignores expenses, financing, vacancy, and condition. A property can clear 1% and still lose money if taxes, insurance, maintenance, and the mortgage eat the rent. Passing the rule means 'this is worth a full analysis' — run cap rate, cash-on-cash, and DSCR on it before concluding it cash-flows.
They're cousins. The 1% rule is a gross-rent screen (rent vs price, before expenses); cap rate is a net screen (NOI vs value, after operating expenses). A property can pass the 1% rule and have a mediocre cap rate if its expenses are high. Use the 1% rule to filter quickly, then cap rate and cash-on-cash to actually compare and evaluate the deals that pass.
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