^{April 22, 2024 | Reading Time: 1 Minute}

The 1% rule is a guiding principle in real estate investing that assesses the relationship between a property’s purchase price and the income it can generate. According to this rule, the monthly rental income should be at least 1% of the property’s buying price.

To apply the 1% rule, simply multiply the investment property’s purchase price by 1% (or 0.01). Alternatively, you can move the decimal point of the purchase price two places to the left. Either method will give you the minimum rent amount to aim for each month.

If the property requires repairs or renovations, factor in those costs by adding them to the purchase price before applying the 1% rule.

For instance, let’s consider a property priced at $150,000. To meet the 1% rule, the minimum monthly rent should be:

$150,000 x 0.01 = $1,500/month

If additional repairs costing $10,000 are necessary, the adjusted total cost becomes $160,000. Applying the 1% rule to this figure, the monthly rent should ideally be $1,600.