A 10-second gut check for any rental: does the monthly rent clear 1% of the purchase price? If it does, the deal is worth a closer look.
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The 1% rule is a quick screen, not a full analysis. It says that for a rental to be worth deeper diligence, its monthly rent should be at least 1% of the all-in purchase price. It won't tell you whether a deal is good - cap rate and cash-on-cash do that - but it's a fast way to filter a long list down to the few worth modeling in detail.
| Purchase price | $220,000 |
| Monthly rent | $2,000 |
| Rent-to-price ratio | 0.91% |
| Result | Below the 1% rule |
At $2,000 rent this property falls just short - it would need about $2,200/month (or a lower price) to clear the bar. In hot markets very few properties pass the 1% rule, so treat it as one input, not a hard cutoff.