The 1% rule is a rule of thumb: a rental should bring monthly rent of at least 1% of its purchase price. A quick IF flags whether a deal clears the bar before you dig deeper.
The example
$2,200 rent on a $200k house.
| A | B | |
|---|---|---|
| 1 | Item | Value |
| 2 | Price | 200000 |
| 3 | Rent vs 1% (2000) | $2,200 → Pass |
The formula
The formula:
How it works
How it works:
- 1% of price is the monthly rent target:
price * 0.01. - Compare the actual monthly rent with
>=and return Pass/Below with IF. - It’s a screen, not a verdict — a quick filter to shortlist before real analysis.
- A stricter 2% rule or a softer 0.7% applies in different markets.
It’s only a heuristic. The 1% rule ignores taxes, insurance, HOA, vacancy, and condition — high-tax or high-appreciation markets routinely fail it yet still make sense. Use it to triage a long list, then run cap rate and cash-on-cash on anything that passes.
Try it: interactive demo
Price and monthly rent.
Variations
Rent-to-price ratio
The actual percent:
2% rule
Stricter bar:
Target rent
Rent to hit 1%:
Pitfalls & errors
Heuristic only. It ignores expenses, taxes, and appreciation — never decide on it alone.
Market-dependent. Many strong markets fail the 1% rule; adjust the threshold to your area.
Use total cost. For rehabs, compare rent to price + repairs, not price alone.
Practice workbook
Frequently asked questions
How do I check the 1% rule in Excel?
What is the 1% rule in real estate?
Is the 1% rule reliable?
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