What is the 1% rule?
The 1% rule says a rental property's monthly rent should be at least 1% of its purchase price, including repairs. A $200,000 house should rent for $2,000 a month or more. It's a quick filter for deciding which listings deserve a full analysis, not a reason to buy.
Related screening ratios
- 2% rule: a stricter version that usually only works in low-price markets or with heavy rehab.
- Gross rent multiplier (GRM): price ÷ annual rent. A ratio of 8.3 equals the 1% rule; lower numbers mean more rent per dollar.
- Gross yield: annual rent ÷ price. The 1% rule equals a 12% gross yield.
Does the 1% rule still work?
In many US metros, typical homes rent for 0.5% to 0.8% of price, so few listings pass. That doesn't make every property below 1% a bad deal, especially in markets with strong appreciation, but it does mean you need to check cash flow carefully. Properties that easily pass 1% or 2% are often in areas with higher vacancy, older housing stock and more repairs, so the expenses eat more of the rent.
Once a property passes your screen, run it through the rental property calculator with realistic vacancy, repairs, capex and management.
Frequently asked questions
Is the 1% rule realistic today?
Should I include repair costs in the 1% rule?
What is a good gross rent multiplier?
Last reviewed: 2026-10-09