1. What is the 1% Rule?

The 1% Rule is a quick screening tool used by real estate investors to evaluate rental property profitability. It states that the monthly rent should be at least 1% of the total property purchase price.

2. How Does the Calculator Work?

The calculator uses the 1% Rule formula:

Where:

• \( \text{Property Price} \) — Total purchase price of the property
• \( \text{Monthly Rent} \) — Expected monthly rental income
• \( 1\% \) — The minimum rental yield threshold

Explanation: This rule helps investors quickly assess whether a property has the potential to generate sufficient cash flow to cover expenses and provide profit.

3. Importance of the 1% Rule

Details: The 1% Rule serves as an initial filter for real estate investments. Properties meeting this criterion typically have better cash flow potential, making them more likely to be profitable rental investments.

4. Using the Calculator

Tips: Enter the total property purchase price and expected monthly rent. The calculator will determine if the property meets the 1% rule and show what percentage of the target you're achieving.

5. Frequently Asked Questions (FAQ)

Q1: Is the 1% Rule applicable in all markets?
A: The rule works best in markets with moderate property prices and strong rental demand. In high-cost areas, achieving 1% may be challenging.

Q2: What if a property doesn't meet the 1% Rule?
A: Properties below 1% may still be good investments if they offer strong appreciation potential, low expenses, or other unique advantages.

Q3: Does the 1% Rule account for expenses?
A: No, this is a gross income rule. You still need to factor in property taxes, insurance, maintenance, vacancies, and other operating expenses.

Q4: What's a good percentage above 1%?
A: Properties achieving 1.5% or higher are considered excellent, while those between 0.8%-1% may require more careful analysis.

Q5: Should this be the only metric for investment decisions?
A: No, this is just a screening tool. Always conduct thorough due diligence including cash flow analysis, cap rate calculation, and market research.