Answer first
What this calculator tells you
Check whether a rental's monthly rent reaches 1 percent of its price, and the shortfall if not. Screen rental listings quickly before you run a full cash flow analysis. Formula: Rent-to-price ratio = monthly rent ÷ purchase price × 100; rent needed at 1 percent = price × 0.01. At the worked-example inputs, the rent as a share of price is 0.933%. Holding every other input steady, moving purchase price from $240,000 to $360,000 moves the result from 0.778% to 1.2%.
Transparent method
The formula
Screen rental listings quickly before you run a full cash flow analysis.
Worked example
Example inputs
How to interpret the result
The 1 percent rule is a quick screen: monthly rent should be at least 1 percent of the purchase price. A $300,000 property needs $3,000 a month to pass, and $2,800 falls short by $200, at about 0.93 percent. The rule is a filter, not a verdict. It says nothing of taxes, insurance, repairs or vacancy, and it favors cheaper markets where rents run high against prices.
At the worked-example inputs the rent as a share of price is 0.933%. It rises with monthly rent and falls as purchase price increases.
Actual vacancy, maintenance, financing, taxes and local law may differ.
Before you rely on it
What to check
Follow a pass with a full cash flow analysis. A property that meets the rule can still lose money once expenses and financing are counted.
The common error
Where people go wrong with 1% rule calculator
Treating a fail as a rejection in an expensive market. Few properties in high-priced areas meet 1 percent, and the rule was built for cheaper ones.
Sensitivity evidence
How purchase price changes the rent as a share of price
Holding every other input at the worked-example value, moving purchase price from $240,000 to $360,000 moves the rent as a share of price from 0.778% to 1.2%: a spread of 0.389%, or 42% of the worked-example result.
| Purchase price | Rent as a share of price | Rent needed to meet 1 percent | Shortfall against 1 percent |
|---|---|---|---|
| $240,000 | 1.2% | $2,400 | $0.00 |
| $270,000 | 1.0% | $2,700 | $0.00 |
| $300,000worked example | 0.933% | $3,000 | $200 |
| $330,000 | 0.848% | $3,300 | $500 |
| $360,000 | 0.778% | $3,600 | $800 |
Every input, tested
Which input moves the rent as a share of price most
Of the 2 inputs, monthly rent moves the rent as a share of price most (0.187% across the range tested) and purchase price moves it least (0.189%).
| Input | Tested from | To | Rent as a share of price at each end | Swing |
|---|---|---|---|---|
| Monthly rent | $2,520 | $3,080 | 0.840% to 1.0% | 0.187% (20%) |
| Purchase price | $270,000 | $330,000 | 1.0% to 0.848% | 0.189% (20%) |
Two variables at once
Rent as a share of price by purchase price and monthly rent
Across the grid the rent as a share of price runs from 0.622% to 1.4%. Moving purchase price from $240,000 to $360,000 shifts it by 0.389% at the middle column, and moving monthly rent from $2,240 to $3,360 shifts it by 0.373% at the middle row, so purchase price is the bigger lever here.
| Purchase price \ Monthly rent | $2,240 | $2,800 | $3,360 |
|---|---|---|---|
| $240,000 | 0.933% | 1.2% | 1.4% |
| $270,000 | 0.830% | 1.0% | 1.2% |
| $300,000 | 0.747% | 0.933% | 1.1% |
| $330,000 | 0.679% | 0.848% | 1.0% |
| $360,000 | 0.622% | 0.778% | 0.933% |
The highlighted cell is the worked example: 0.933%.
Step by step
The worked example, input by input
| Input | Value used | What it means |
|---|---|---|
| Purchase price | $300,000 | Enter the purchase price used in this calculation. |
| Monthly rent | $2,800 | Enter the monthly rent used in this calculation. |
| Rent as a share of price | 0.933% | |
| Rent needed to meet 1 percent | $3,000 | |
| Shortfall against 1 percent | $200 | |
Inputs, definitions and assumptions
Purchase price
Enter the purchase price used in this calculation. The prefilled worked-example value is $300,000.
Monthly rent
Enter the monthly rent used in this calculation. The prefilled worked-example value is $2,800.
How to use this calculator
- 1Verify the inputs. Gather purchase price and monthly rent from your own documents; the prefilled values are examples.
- 2Save a baseline. The worked example puts the rent as a share of price at 0.933%. Store your own version of it as Scenario A.
- 3Test one change. Start with monthly rent, the input with the biggest effect here: moving monthly rent from $2,520 to $3,080 takes the rent as a share of price from 0.840% to 1.0%, a swing of 20% of the worked-example figure.
- 4Check the extremes. At half the example monthly rent ($1,400) the rent as a share of price is 0.467%; at double ($5,600) it is 1.9%.
People also ask
Frequently asked questions
How do you calculate 1% rule?
Rent-to-price ratio = monthly rent ÷ purchase price × 100; rent needed at 1 percent = price × 0.01. Enter purchase price in dollars and monthly rent in dollars. At the worked-example inputs the rent as a share of price is 0.933%.
What does the 1% rule result mean?
Screen rental listings quickly before you run a full cash flow analysis. At the worked-example inputs the rent as a share of price is 0.933%. It rises with monthly rent and falls as purchase price increases.
How much does purchase price change the rent as a share of price?
Holding every other input at the worked-example value, moving purchase price from $240,000 to $360,000 moves the rent as a share of price from 0.778% to 1.2%, a spread of 0.389%.
What are the limits of this 1% rule calculator?
Actual vacancy, maintenance, financing, taxes and local law may differ. The tables on this page test purchase price only from $240,000 to $360,000; a value outside that range is not tabulated here.
Which input moves the rent as a share of price most in the 1% rule calculator?
Ranked by how far each moves the rent as a share of price across the range tested: monthly rent (0.187%, 20%) and purchase price (0.189%, 20%).
If I double monthly rent in the 1% rule calculator, does the rent as a share of price double?
Doubling it from $2,800 to $5,600 takes the rent as a share of price from 0.933% to 1.9%, which is 2.00 times the worked-example figure. So the result scales almost exactly in proportion. Halving it to $1,400 gives 0.467%.
How much does monthly rent matter in the 1% rule calculator?
The worked example uses $2,800. With the other inputs left at the worked example, moving monthly rent from $2,520 to $3,080 takes the rent as a share of price from 0.840% to 1.0%, a swing of 20% of the worked-example figure.
Which inputs change the rent needed to meet 1 percent in the 1% rule calculator?
At the worked-example inputs it is $3,000. Purchase price takes it from $2,700 to $3,300.
Which inputs change the shortfall against 1 percent in the 1% rule calculator?
At the worked-example inputs it is $200. Purchase price takes it from $0.00 to $500 and monthly rent takes it from $480 to $0.00.
How much should I budget for maintenance and repairs?
Enough to fund replacement of major components over their remaining useful lives, which depends on the age and condition of the specific building. A percentage of rent is a common approximation. An itemised schedule is far more reliable for an older property.
Sources and evidence
Free Calculators Online is independent and is not affiliated with or endorsed by the source organizations. Educational estimates only.