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Leverage Ratio
Two Percent Rule
Two-Input Ratio Deal Analysis Most Popular Cash Flow Deal Screening

One Percent Rule

Does monthly rent equal or exceed 1% of property value?

Example Result

Sample Data
0.74%

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

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40-Year Projection Chart

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One Percent Rule Formula

At Purchase Monthly Rent / Purchase Price 0.74%
Over Time Current Monthly Rent / Current Property Value 0.74%

What This Means

A sample property priced at $385,000 with $2,850/month rent has a one percent rule of 0.74% at Purchase (Month 0). The 1% rule is the fastest deal screening tool. You can evaluate a potential purchase in seconds without a calculator. While not definitive, properties that pass the 1% rule are worth deeper analysis.

Where This Value Comes From

One Percent Rule is not entered directly — it is calculated from Monthly Rent and Property Value. See the formula breakdown above and the detailed inputs below.

Inputs That Determine One Percent Rule

Platform Distribution

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Why It Matters

The 1% rule is the fastest deal screening tool. You can evaluate a potential purchase in seconds without a calculator. While not definitive, properties that pass the 1% rule are worth deeper analysis.

Detailed Explanation

The 1% rule checks whether monthly rent is at least 1% of property value. At the moment of purchase, Property Value equals your Purchase Price — so this is the classic quick acquisition screen. As you hold the property over time, rent typically grows with inflation and property value changes with the market, and this ratio evolves to reflect your current rent yield relative to market value. This is a rule of thumb, not a guarantee of cash flow.

Discussion

Currently displayed as True/False, but showing the actual percentage (e.g. 0.74%) would be more useful than a simple pass/fail. Investors could see how close they are to meeting the rule, rather than just whether they pass or not.

Example

Sample Result
No

Based on a sample $385,000 property with $2,850/month rent, 20% down, 7% interest rate.

Related Calculations

Years Owned

U

Time elapsed since the property was purchased, calculated from the purchase date to today.

Profit If Sold

U

Net profit if sold today, based on actual years owned.

Return If Sold

U

Net sale profit as a percentage of initial cash invested, based on actual years owned.

Total Cash to Close

U

Cash needed at the closing table to acquire the property.

$88,550 Example

Total Cash Invested

U

Total cash committed to the property: closing costs, rent-ready, reserves, and negative cash flow.

$110,830 Example

All-In Cost Per Unit

U

Total acquisition cost (including closing and rehab) per unit.

$396,550 Example

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