1% Rule Calculator

What the rule actually checks — and what it can't

This calculator's own logic is deliberately narrow. It takes purchase price plus rehab as all-in cost, multiplies it by 1% to get the rent needed to pass, multiplies it by 2% for the stricter version, and compares both against the rent you enter. That's the entire model — no taxes, no insurance, no maintenance, no vacancy, no mortgage payment. The module's own comment calls it "a fast triage tool, not a verdict." The gross rent multiplier (GRM) it also computes — all-in cost divided by annual gross rent — is the same idea inverted: a smaller number means the rent pays back the price faster, and it carries the identical blind spot.

The rule against today's cost of money

The 1% rule doesn't ask what the property costs to finance — that's the whole point of it being fast. But it's worth working through what happens when you add financing back in, because the rule's silence on that point is exactly where it can mislead. Take the $240,000 example above with 80% financing: a $192,000 loan at the current Freddie Mac PMMS 30-year fixed average of 6.71% (week ending September 3, 2026) amortized over 30 years works out to roughly $1,240 a month in principal and interest alone. Against $2,400 of rent — the exact amount needed to clear the 1% threshold — that leaves about $1,160/month for property tax, insurance, maintenance, vacancy, and management before a single dollar of cash flow exists. Whether that's enough depends entirely on local taxes and insurance, which this calculator does not model and which is precisely why a pass is a screen, not a green light.

A property clearing 1% today, with a mortgage rate near 6.71%, is carrying a meaningfully heavier debt-service load per dollar of price than the same rule applied when money was cheaper. The rule's threshold hasn't moved — it's still 1% of price, full stop — but the cost of the leverage sitting underneath it has, and the calculator's gross rent-to-price ratio says nothing about that at all.

What the rule survives, and what it doesn't

The rule survives as a triage step: it's still one of the fastest ways to rule out a listing before spending an hour on it, because it needs only two numbers you already have. What it does not survive is any claim to tell you whether a property will cash-flow. That was never really true even when rates were lower, but a higher mortgage rate makes the gap between "passes the rule" and "actually cash-flows" wider, because the fixed cost sitting between gross rent and net cash flow — the mortgage payment — is larger for the same loan amount. A property that would have cash-flowed comfortably after clearing 1% at a lower rate can sit near break-even at 6.71%, with identical rent and identical price.

None of this means the 1% rule should be abandoned. It means treating a pass as permission to run the real numbers, not as the analysis itself. A property that fails 1% by a little, in a market where appreciation and rent growth are doing real work, can still be worth underwriting properly — and a property that clears 1% comfortably on paper can still fail once an actual mortgage payment at today's rate is subtracted from actual rent.

Reading a listing against this screen

1. Use all-in cost, not list price. If the property needs rehab, add it before you multiply by 1% — a deal that clears the rule on sticker price alone can fail it the moment the real budget goes in.
2. Use rent you can defend, not a listing agent's pro-forma. The rule is only as honest as the rent figure going into it.
3. Treat a pass as a reason to keep looking, not a reason to stop. Run the property through a full cash-flow analysis before you assume the rule's headline number means anything about your actual monthly cost of financing it.
4. If the deal is close to the line, check what a real mortgage payment at the current rate does to it — the rule's own math never subtracts one.