What is the 1 percent rule in rental investing?

The rule is arithmetic, not law. Take the all-in price of a property, including purchase and expected repairs, and multiply by one percent. If the monthly rent meets or beats that number, the deal clears the first hurdle.

Investors like it because it is fast. You can run it in your head on a listing before you open a spreadsheet. It quietly checks whether rent sits high enough against price to have a shot at cash flow.

Treat the rule as a bouncer at the door, not the whole party. Use it to reject obvious non-starters quickly, then underwrite the survivors in detail. A property that passes still needs real numbers on taxes, insurance, vacancy, and repairs.

• Screen fast: skip deals where rent falls far below one percent of the all-in price.
• Verify rent: use comparable local listings, not the seller's hopeful estimate.
• Include repairs: add renovation costs to the price before you run the math.

The 1 percent rule ignores most of what determines profit. It says nothing about property taxes, insurance, financing, or maintenance, and those swing widely by location. A high-tax or high-insurance market can sink a property that looks fine on the ratio alone.

In expensive coastal markets, almost nothing hits one percent, yet investors still buy for appreciation. In cheaper markets, a property can clear the rule easily and still bleed cash from constant repairs or long vacancies. Use it as a starting point, then dig in.

After a property passes the rule, pressure-test it with fuller metrics. Cash-on-cash return, cap rate, and a line-by-line expense estimate tell you far more than a single ratio. Add a vacancy allowance and a repair reserve so your numbers survive a bad month.

Weigh tenant quality too, not just price. A common affordability screen is income around two to three times the monthly rent. Strong tenants protect the cash flow that the 1 percent rule only hints at.