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1 Percent Rule Calculator

Enter the purchase price and monthly rent to test the 1% rule.

How it is calculated

The tool compares the monthly rent with a fixed share of the purchase price. required rent = purchase_price × rule% ÷ 100, rent ratio = monthly_rent ÷ purchase_price × 100 and rent gap = monthly_rent − required rent. A negative gap means the rent falls short of the rule, a positive one means it clears it. It also reports the highest price the current rent supports at that rule, monthly_rent ÷ (rule% ÷ 100). The rule percentage is an input, set to 1 by default, so you can test a stricter figure such as 1.2. Price and rule must be above zero and rent cannot be negative. The test ignores taxes, insurance, vacancy and loan costs.

Worked example

A rental is priced at 220,000 and rents for 1,850 a month. Required rent at 1%: 220,000 × 1% = $2,200.00. Rent ratio: 1,850 ÷ 220,000 × 100 = 0.84%. Gap: 1,850 − 2,200 = -$350.00, so the property misses the rule. The highest price the 1,850 rent supports at 1% is 1,850 ÷ 0.01 = $185,000.00, which is the price you would need to negotiate towards.

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Common mistakes

  • Using the annual rent instead of the monthly rent. The rule compares one month of rent with the price, so 22,200 a year must be entered as 1850.
  • Entering the rent you hope to charge, not what comparable units actually rent for. An optimistic rent makes any property look as if it passes.
  • Adding renovation costs to the price in one case and not in another. Use the total you will have put in, because that is the amount the rent has to justify.
  • Reading a pass as a profit guarantee. A property that clears 1% can still lose money after taxes, insurance, vacancy and loan interest.
  • Treating a gap of a few hundred as final. Check the maximum price line: it shows how far the price would have to fall for the deal to meet the rule.

About this calculator

The 1% rule is a quick screening test rental-property investors use before running a full analysis: it says monthly rent should equal at least 1% of the property's purchase price. A $200,000 rental clearing that bar would need to rent for at least $2,000 a month; anything below that is treated as a warning sign that the deal is priced too high relative to its rental income.

Real estate investors use it as a first-pass filter when scanning many listings, since it takes seconds to check and quickly eliminates deals unlikely to cash-flow before spending time on a full pro forma with taxes, insurance, vacancy and maintenance costs. It's deliberately crude — it says nothing about appreciation, financing terms or a specific market's rent growth — so most experienced investors treat failing the 1% rule as "look closer" rather than an automatic disqualifier, especially in expensive coastal markets where almost nothing passes it.

The 1% threshold is adjustable, and whether a given ratio passes is left for you to judge.

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