1% Rule Calculator
Quickly screen rental property deals with the 1% rule. Monthly rent should be at least 1% of the total acquisition cost for positive cash flow potential.
What Is the 1% Rule in Real Estate?
The 1% rule is a quick screening tool used by real estate investors to evaluate whether a rental property is worth analyzing further. The rule states that the monthly rent should be at least 1% of the total acquisition cost (purchase price plus any renovation or repair costs).
The formula: Monthly Rent / (Purchase Price + Repair Costs) >= 1%
For example, a property that costs $200,000 should rent for at least $2,000/month to pass the 1% rule. If you bought a $150,000 property and put $30,000 into renovations, the total cost is $180,000, so you'd need at least $1,800/month in rent.
The 2% rule is a more aggressive version. Properties that meet the 2% threshold tend to have very strong cash flow but are typically found in lower-cost markets with higher vacancy and management risk.
The 1% rule is a screening tool, not a complete analysis. A property can pass the 1% rule and still lose money if taxes, insurance, or vacancy are unusually high. Always run a full analysis using a rental ROI calculator or cap rate calculator before making an investment decision.
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