Rent-to-Price Rule Calculator
Test whether monthly rent reaches your target percentage of the purchase price, and find the maximum price that rule allows you to pay.
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The one percent rule says monthly rent should be at least one percent of the purchase price. It is a rule of thumb, not analysis, and in most expensive cities nothing passes it. Its value is as an instant filter and as a way of noticing when a market has moved far from the rent that supports it.
The threshold is adjustable here because one percent is not a universal law. In markets with lower interest rates or lower running costs, a lower threshold can still produce positive cash flow.
The formula
Ratio = monthly rent ÷ purchase price × 100. To pass a one percent threshold, a 400,000 property must rent for 4,000 a month. Rearranged, the most you can pay at a given rent is rent ÷ threshold.
Worked example
A 400,000 property renting at 2,200 a month has a ratio of 0.55% — well under one percent. To pass, it would need 4,000 of rent, or the price would have to fall to 220,000. Both are far from reality, which tells you this property is bought for capital growth rather than income.
Why almost nothing passes in expensive cities
Where prices have risen faster than rents for years, the ratio compresses. That does not automatically make those markets bad investments, but it does mean the return has to come from appreciation, and appreciation is an assumption rather than a contract.
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Create your free property pageFrequently asked questions
Is the one percent rule still relevant?
As a screening shortcut, yes; as a hard requirement, only in markets where it is achievable. Its real usefulness now is showing how far a market has moved from rent-supported pricing, which is information in itself.
What threshold should I use instead?
Work backwards from cash flow rather than adopting someone else number. Run a full projection on two or three properties you know, find the ratio at which they turn positive, and use that as your screen.
Does it account for running costs?
No, none at all — that is the point of a rule of thumb. Two properties passing at the same ratio can differ enormously once service charges, local taxes and maintenance are counted.
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