About the 1% and 50% Rule Calculator
The 1% rule is a quick screen used by rental investors: a property is worth a closer look if its monthly rent is at least 1% of the all-in purchase price (price plus immediate repairs). A $200,000 house should rent for about $2,000 a month. The 50% rule is its companion: assume roughly half of the rent will go to operating expenses — taxes, insurance, repairs, vacancy, management and capital expenditures — before the mortgage.
This calculator applies both rules at once. It shows your rent-to-price ratio and whether it passes, the rent you would need to hit your target, the most you could pay at the current rent, and an estimated monthly cash flow after 50% expenses and your mortgage payment. You can raise the target to 2% for older, lower-priced markets or loosen the expense percentage for newer homes.
These are rules of thumb for filtering listings quickly, not underwriting. Properties that pass should still be run through a full rental analysis with real tax, insurance and rent figures; many good properties in expensive markets fail the 1% rule but make sense for appreciation.
With the default inputs, the rent-to-price ratio is 0.85%. Change any value above to recalculate instantly.
How to use the 1% and 50% rule calculator
- 1Enter the purchase price and any repairs needed before renting.
- 2Enter the realistic monthly rent from comparable rentals.
- 3Choose the rule target (1% by default) and the expense percentage.
- 4Enter your down payment, rate and term to estimate cash flow.
- 5Use the pass/fail check and maximum price to decide which listings to analyze further.
Formula and method
The 1% rule compares one month of rent with the all-in cost of the property, meaning the purchase price plus repairs needed before renting. Dividing rent by that cost gives the rent-to-price ratio; at or above the target, the property passes the screen. Rearranging the rule gives the rent you need and the highest price you can pay at the current rent.
The 50% rule estimates that operating expenses, including vacancy, repairs and capital reserves but not the mortgage, will consume about half of gross rent over time. The remaining half must cover principal and interest, which is calculated with the standard amortization formula on the price minus your down payment. What is left is a rough monthly cash-flow estimate.
- Repairs
- Immediate rehab needed before renting
- target
- Rule percentage, normally 1%
- Expense%
- Share of rent for operating costs, normally 50%
- P&I
- Monthly principal and interest
Worked examples
$250k house needing $10k, renting for $2,200
The all-in cost is $260,000, so the 1% target rent is $2,600. At $2,200 the ratio is 0.85% and it fails; you would need to pay $210,000 or less. Half the rent ($1,100) goes to expenses and a $200,000 loan at 7% costs $1,330.60, leaving about −$231 a month.
$150k fixer with $20k rehab, renting for $1,850
All-in cost is $170,000, so $1,850 rent is a 1.09% ratio — it passes by $150. After $925 of expenses and a $798.36 mortgage on $120,000, estimated cash flow is about $127 a month.
$400k home in a high-cost market
Rent of $2,600 on a $400,000 home is only 0.65%. The 1% rule would require $4,000 of rent or a $260,000 price. With $1,300 of expenses and a $2,128.97 mortgage, the property would lose about $829 a month.
Frequently asked questions
What is the 1% rule in real estate?+
The 1% rule says a rental’s monthly rent should be at least 1% of its purchase price plus repairs. A $180,000 all-in property should rent for $1,800 or more. It is a fast filter, not a full analysis.
What is the 50% rule for rental property?+
The 50% rule estimates that operating expenses — taxes, insurance, repairs, vacancy, management and capital expenditures — will average about 50% of gross rent, excluding the mortgage. The other 50% must cover debt service and cash flow.
Is the 1% rule still realistic?+
In many US metro areas, prices have risen faster than rents, so few properties meet 1%. Investors in high-cost markets often accept 0.6%–0.8% and rely on appreciation, while lower-priced Midwest and Southern markets can still hit 1% or more.
What is the 2% rule?+
The 2% rule is a stricter version requiring monthly rent of 2% of the price. It is mostly met by low-priced properties in older neighborhoods, which often carry higher repair, vacancy and management costs.
Should I buy a property just because it passes the 1% rule?+
No. Passing only means the deal deserves a detailed look. Verify real taxes, insurance, repair needs, vacancy, neighborhood quality and financing with a full rental property analysis before making an offer.
Results are estimates for educational purposes and are not financial advice. Rates, fees and terms vary — confirm with your lender or a licensed advisor before making decisions.