The 1% Rule

The 1 percent rule is a back-of-the-envelope test investors use to filter listings fast. Multiply the purchase price by 1 percent: a $250,000 home would need about $2,500 in monthly rent to pass. If the expected rent clears that bar, the property is worth a closer look; if it falls well short, the numbers will probably struggle to cash flow once a mortgage, taxes, insurance, and vacancy are counted.

It is deliberately crude. The rule ignores operating expenses, financing terms, and local property taxes, any of which can flip a deal. In high-price coastal markets almost nothing passes, while in many inland markets it is routine, so treat it as a screen rather than a verdict. Our rental property ROI playbook explains why the rule has gotten harder to meet and what actually drives returns, and the Airbnb investment playbook applies the same discipline to short-term rentals.