The 1% rule is a rough screening tool used by some property investors: a rental property’s monthly rent should be at least 1% of its purchase price for the deal to be worth deeper analysis.
For example, under this rule, a property purchased for $200,000 should rent for at least $2,000 per month to pass the initial screen.
This rule doesn’t account for property taxes, insurance, maintenance, vacancy periods, or financing costs, so passing it doesn’t guarantee profitability – it’s a fast filter, not a full analysis.
In many high-cost urban markets, very few properties meet the 1% threshold, which has led some investors to treat it as an outdated benchmark rather than a strict requirement.
It’s best used as a first-pass filter to quickly rule out obviously weak deals, followed by a full cash flow analysis – including all expenses – before making any actual investment decision.