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.
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Written and maintained by the Aptoria editorial team
Editorial method reviewed July 28, 2026. Aptoria reviews scope, source fit, examples, limitations, links, and publication gates. This record does not claim attorney, CPA, lender, appraiser, or other independent professional sign-off.
Related terms
Investing metrics
Capitalization rate (cap rate)
Capitalization rate is annual net operating income divided by a stated property price or value, expressed as a percentage.
Investing metrics
Gross rent multiplier (GRM)
A sale-price-to-gross-rent screening multiple whose monthly or annual rent convention must be stated.
Investing metrics
Cash flow
The cash left over each period after all income is collected and all expenses — including the mortgage — are paid.
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