The one percent rule is a guideline investors use to quickly evaluate rental properties. It suggests that a property should generate monthly rent equal to at least one percent of its purchase price.
For example, a $250,000 property would ideally rent for $2,500 per month under this guideline. Investors often use this rule as a first filter before performing deeper analysis.
The rule does not account for expenses, financing terms, appreciation, or local market conditions. In many higher-cost markets, it may be difficult to meet.
The one percent rule is best used as a starting point, not a final decision-making tool.