The 1% rule is the fastest screen in single-family rental investing: monthly rent should be at least 1% of the purchase price. A $200,000 house should rent for at least $2,000/month. If it does, the deal is worth a deeper underwrite. If it doesn\'t, move on — or you\'re buying for appreciation, not cash flow.
It\'s a screen, not a standard. A deal that hits 1.1% might still cash flow poorly after high taxes, insurance, and maintenance. A deal at 0.8% in a rapidly appreciating market might be the right buy. The 1% rule\'s value is that it kills obviously bad deals in 5 seconds so you can spend your time on the ones worth analyzing.
The 2% rule is the same idea, stricter. It\'s realistic in low-cost midwest markets (Cleveland, Detroit, Memphis) where $80k houses can rent for $1,200. In coastal or tier-1 markets, 1% is rare and 2% is nearly impossible.
In 2026, typical rent-to-price by market:
The 1% rule says monthly rent should be at least 1% of the total purchase price. A $200,000 rental needs $2,000/month in rent to pass. It is a quick screen, not a full underwriting standard.
In expensive markets (coastal, tier-1 metros) the 1% rule rarely hits — 0.5–0.7% is common. In midwest and southeast secondary markets, 1%+ is still achievable, especially on value-add deals. Use it as a screen, not a pass/fail gate.
Same math, stricter threshold — monthly rent at least 2% of purchase. Realistic only in low-cost markets (Cleveland, Detroit, Memphis). Hitting 2% usually signals either a very low-priced market or a deal with heavy tenant/management risk.
Use DSCR or cash-on-cash instead. Target DSCR of 1.20×+ on your financing and cash-on-cash of 8–12%. The 1% rule is a shortcut for these; when it doesn't work, just compute the underlying metric directly.
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