1% Rule Rental Property 2027 Screening Calculator

The 1% Rule is a quick-screen tool: a rental property with monthly rent ≥1% of purchase price typically cash-flows positively. Doesn't guarantee profit but filters out the obvious losers. Source: BiggerPockets investor framework.

Include in 1% rule denominator
Pass 1% Rule?
—
Rent / Price × 100
Rent-to-Price Ratio
—
Pass?
—
1% Target Rent
—
2% Rule Target
—
Action
—
Est. Monthly Cash Flow
—
Ad Space

The 1% Rule Defined

Monthly Rent ÷ (Purchase Price + Rehab) ≥ 0.01 (or 1%). A property selling for $200,000 must rent for ≥$2,000/month to pass. Aggressive variant: 2% Rule ($200k must rent for $4,000+). Most US markets in 2027 fail the 1% rule in metro areas; succeed in tertiary cities and Rust Belt. Source: BiggerPockets, biggerpockets.com investor community.

Why 1% Rule Predicts Cash Flow

Rough math: typical 30-year mortgage P&I on 80% LTV ≈ 0.50-0.65% of price/month at 7-8% rates. Add 0.10% taxes, 0.10% insurance, 0.05-0.10% maintenance/vacancy = 0.85-1.00% PITIA + ops. Rent at 1% leaves slim margin. Rent at 1.2-1.5% creates real cash flow. Below 1% typically requires appreciation play.

1% Rule Limitations

(1) Ignores property taxes (varies widely by state). (2) Ignores HOA/condo fees. (3) Doesn't account for capex (roof, HVAC, water heater). (4) Misses location quality (Class A vs C neighborhoods). (5) Doesn't reflect appreciation. Better: use 1% rule for initial screen, then run full pro forma with NOI + DSCR + cash-on-cash.

Alternative Quick-Screens for 2027

Cap rate >7% (NOI ÷ Value) often substitutes 1% rule. Cash-on-cash >8% post-financing. Rent/Income ratio 25-30% (sustainable tenant burden). GRM (price ÷ annual rent) <10 strong, <7 elite. Use whichever framework matches your investment style — long-hold (cap rate), flip-and-hold (1% rule), cash-flow (cash-on-cash).