1% rule calculator
A 10-second screen: does monthly rent clear 1% of what you're actually putting into the deal — purchase price plus rehab, not price alone. For the full picture — cap rate, cash flow, DSCR — use the full deal analyzer.
Rent ÷ total acquisition cost
- Total acquisition cost
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- 1% threshold
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- 2% rule (aggressive)
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Screening rule of thumb — not a valuation. Confirm with a full underwrite (cap rate, cash-on-cash, DSCR) before any offer.
Why rehab belongs in the denominator
The 1% rule is usually stated as "monthly rent should be at least 1% of the purchase price," which is a fine shorthand for a turnkey property with no repair work. It quietly breaks down for a BRRRR or value-add deal, where a low purchase price hides a large rehab budget. A $180,000 house needing $20,000 of work is a $200,000 deal in every sense that matters — the seller's price is just one part of what you're actually putting in.
This calculator uses total acquisition cost — purchase price plus upfront rehab — as the denominator by default, so a heavy-rehab property can't pass the screen on paper while quietly missing it once the real cost basis is counted. Set rehab to $0 for a turnkey property and the number is identical to the classic price-only version.
How to use the result
Passing the 1% rule is a green light to look closer, not a green light to buy — it says nothing about property taxes, insurance, vacancy, financing, or the neighborhood. Failing it is common in higher-priced coastal and urban markets where rents haven't kept pace with purchase prices, and isn't disqualifying by itself. The 2% rule is the same math at double the bar; treat it as a rare, aggressive threshold rather than a realistic target in most US metros today.
Use this page to triage a stack of listings in seconds, then run anything that clears the bar — or looks promising despite missing it — through the full deal analyzer for cap rate, NOI, cash-on-cash return, and DSCR before you make an offer.
1% rule FAQ
Common questions about the 1% and 2% screening rules, answered from the same tested formula module used above.
What is the 1% rule in real estate?
The 1% rule is a quick screen: monthly rent should be at least 1% of the total acquisition cost (purchase price plus any upfront rehab). For example, $2,000 rent on a $200,000 purchase with no rehab passes exactly. Passing it suggests the deal may cash flow; failing it is common in higher-priced markets and is not disqualifying on its own. It is a filter, not a valuation.
Does the 1% rule include rehab costs?
It should. The denominator is your total acquisition cost — purchase price plus any upfront rehab or repair budget, not purchase price alone. Skipping rehab understates your real cost basis, so a heavy-rehab deal can look like it passes the 1% rule on paper while actually falling short once the rehab spend is counted.
What is the 2% rule?
The 2% rule is the same screen at double the threshold: monthly rent at least 2% of total acquisition cost. It's considerably more aggressive and rarely achievable in most US metros at market rents and prices — treat it as a rare, high-cash-flow bar rather than a realistic target in most markets.
Is the 1% rule a good way to value a property?
No — it's a fast triage screen, not a valuation. It ignores operating expenses, vacancy, financing, and location quality entirely. Use it to quickly filter listings, then confirm any deal that passes with a full analysis: cap rate, NOI, cash-on-cash return, and DSCR.
What if a property fails the 1% rule?
Failing is common, especially in higher-priced coastal and urban markets where rents don't scale with purchase prices as steeply as they do elsewhere. A property that fails the 1% rule can still be a solid investment on appreciation, cash-on-cash return, or other factors — treat a failed screen as a prompt to look closer, not an automatic pass.