1% Rule (Rental) Calculator
The 1% rule is one of the fastest screens a rental property investor can run. It asks a single question: does the monthly rent come to at least 1 percent of the purchase price? If a home costs 250,000 dollars, the rule wants to see rent of 2,500 dollars a month before the deal earns a closer look. The math is deliberately simple. Take the purchase price, multiply it by 0.01, and that is the target rent. Then compare the actual rent against that target to see whether the property clears the bar. This calculator takes a purchase price and a monthly rent, computes the 1% target, expresses the actual rent as a percent of price, and gives you a plain pass or fail reading. It is a first filter, not a full analysis. It deliberately ignores property taxes, insurance, maintenance, vacancy and financing, so you can compare candidates on the same simple basis before running the deeper numbers. Use it to shortlist listings, sanity check an asking price, or sense whether rents in an area can support a purchase. Every figure here is computed deterministically from the formula shown below, with a worked example that reconciles exactly to the calculator so you can follow each step.
The 1% rule sets a target rent of 1 percent of the purchase price and compares it against the actual rent: target rent = price x 0.01. A home priced at $250,000 has a 1% target rent of $2,500.00. A monthly rent of $2,200 is 0.88% of price, which is below the 1% target.
1% rule formula
1% target rent = Purchase price x 0.01
Rent as percent of price = Monthly rent / Purchase price x 100
Deal passes when monthly rent is greater than or equal to the target
A higher percent of price is more favorable to the investor
The rule compares rent to price as a single percentage. Multiply the price by 0.01 to get the target rent, then divide the actual rent by the price to see where it lands. A reading at or above 1.00 percent clears the screen.
Worked example
A home is on the market for 250,000 dollars. A comparable property nearby rents for 2,200 dollars a month.
- 1% target rent = 0.01 x 250,000 = 2,500
- Rent as percent of price = 2,200 / 250,000 x 100 = 0.88%
- 2,200 is below the 2,500 target, so the deal is below the 1% target
The verdict is below the 1% target. These are the calculator's default inputs, so the result above matches the widget exactly.
How to read the result
| Rent as percent of price | Implied target multiple | General reading |
|---|---|---|
| 1.00% and over | Meets or beats 1% | Passes the 1% rule |
| 0.70% to 0.99% | Near miss | Borderline, run full numbers |
| Under 0.70% | Well below 1% | Unlikely to cash flow easily |
Thresholds are general rules of thumb, not official guidance. Weigh expenses, financing and local rents alongside the screen.
1% rule calculator: frequently asked questions
What is the 1% rule in real estate?
The 1% rule is a quick screen used by rental property investors. It says that the monthly rent should be at least 1 percent of the purchase price. For a 250,000 dollar home, that target is 2,500 dollars a month. If the rent meets or beats that figure, the deal passes the screen and may be worth a closer look.
How do I calculate the 1% target rent?
Multiply the purchase price by 0.01. For a price of 250,000 dollars, the target monthly rent is 0.01 times 250,000, which equals 2,500 dollars. The calculator does this automatically and compares it against the rent you enter so you can see the gap at a glance.
Is the 1% rule still realistic in 2026?
In many high priced markets the 1% rule is hard to meet, so investors often relax it to a 0.7 or 0.8 percent screen. The rule is a fast first filter, not a hard threshold. Treat a near miss as a prompt to run the full numbers rather than an automatic rejection.
Does the 1% rule account for expenses?
No. The 1% rule looks only at rent and price. It ignores property taxes, insurance, maintenance, vacancy and financing costs. Use it to shortlist properties, then run a cap rate or cash flow analysis before making any offer.
What is the difference between the 1% rule and the 2% rule?
Both compare monthly rent to purchase price. The 1% rule sets the target at 1 percent of price; the stricter 2% rule sets it at 2 percent. The 2% rule is rarely achievable in mainstream markets and is mostly seen in lower priced areas with higher relative rents.
Official sources
- Buying a house, renting and mortgage basics: US Consumer Financial Protection Bureau (CFPB). As at 25 June 2026.
Reviewed by the CalculatorHub team, edited by James Graham, 25 June 2026. See our methodology. This is general information, not financial, tax, legal or investment advice.