What the 1% rule says
The 1% rule is a shortcut: monthly rent should be at least 1% of the purchase price. It's a quick screen to decide whether a deal is worth a closer look.
Why it's only a screen
The 1% rule ignores expenses, financing, and local taxes. Two properties passing the rule can have very different real returns once those are counted.
Cash-on-cash is the real test
After a deal passes the 1% screen, calculate cash-on-cash return with actual expenses and your mortgage to see what you'd truly earn.
Frequently asked questions
Is the 1% rule reliable?
It's a quick screen, not a decision tool — it ignores expenses, taxes, and financing. Use cash-on-cash return to actually evaluate a deal.
What replaces the 1% rule?
A full cash-on-cash (or IRR) analysis with real numbers.
Educational information and estimates only. Not tax advice. Tax rules change and vary by situation; consult a qualified tax professional before acting.