Investing metrics
The 1% rule
A rough rule of thumb that a rental's monthly rent should be at least 1% of its total purchase price.
Glossary
Investing metrics
The 1% rule is a back-of-the-envelope screen: monthly rent should be roughly 1% or more of the all-in purchase price. A $200,000 property would need about $2,000 a month in rent to “pass.” It exists to quickly flag whether a deal is even worth a closer look.
It’s a heuristic, not a law of investing. It ignores operating costs, financing, taxes, and condition, and it’s much harder to meet in high-priced markets. Treat a pass as permission to run the real numbers — NOI, cap rate, and cash flow — not as a verdict on the deal.