Rent-to-Value Rule Calculator

Frequently Asked Questions

What is the 1% rule?

The 1% rule states that a rental property's monthly rent should be at least 1% of its purchase price to be considered a worthwhile investment. A $200,000 property should rent for at least $2,000/month. It's a quick screening filter, not a guarantee of profitability.

Does passing the 1% rule mean the deal is good?

Not necessarily. The 1% rule ignores expenses, financing costs, property taxes, insurance, maintenance, and vacancy. A property that passes the 1% rule in a high-tax, high-insurance market may still cash flow poorly. Use it as a first filter, then run full cash flow analysis.

Is the 2% rule realistic in today's market?

In most US markets, the 2% rule is extremely difficult to meet in 2024–2026. Properties meeting the 2% rule typically exist only in low-cost rural markets or areas with significant deferred maintenance or other risk factors. Most experienced investors target 1% or use cap rate and cash-on-cash return as their primary metrics.

How does rent-to-value relate to cap rate?

Both measure income relative to property value, but cap rate uses net income (after expenses) while RTV uses gross rent. A property at 1% RTV might have a cap rate of 5–7% after expenses, depending on expense ratios. Higher RTV generally correlates with higher cap rates.

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