Real Estate

1% Rule (Rental Property)

Quick check: does this rental property meet the 1% rule?

The 1% rule is a quick screening heuristic for rental properties: monthly rent should be at least 1% of the purchase price for positive cash flow potential. It is a rough filter, not a complete analysis.

Enter your numbers

Purchase Price ($)

Monthly Rent ($)

Results update as you change the inputs. Calculations run in your browser.

Rent-to-Price Ratio

0.55%

one Percent Target: $4000/mo
two Percent Target: $8000/mo
verdict: Fails 1% Rule — Likely Negative Cash Flow

See the formula

Formula and method

Rent-to-Price % = (Monthly Rent / Purchase Price) × 100

The 1% rule originated in US real estate as a rule of thumb suggesting properties renting for ≥1% of purchase price per month tend to generate positive cash flow.

Worked examples

Prairie duplex

Purchase Price ($):: 280000
Monthly Rent ($):: 2900

Rent-to-Price Ratio: 1.04%

Toronto condo

Purchase Price ($):: 700000
Monthly Rent ($):: 2800

Rent-to-Price Ratio: 0.40%

Assumptions and limits

Simplified screening tool only
Does not account for actual expenses or financing

This tool provides an educational estimate. Rules, rates and personal circumstances can change the answer. Review the assumptions before relying on a result. Report a correction.

Common mistakes to avoid

Using the 1% rule as the only analysis — it ignores location quality, appreciation potential, and actual expenses.
Applying it to markets like Toronto or Vancouver where 0.3-0.5% is normal — context matters.
Not accounting for repairs, management fees, and vacancy in actual cash flow analysis.

Frequently asked questions

Is the 1% rule realistic in Canada?

In major Canadian cities, almost no property passes the 1% rule. Most Toronto and Vancouver rentals fall in the 0.3-0.5% range. Investors in these markets are betting on appreciation, not cash flow.

What does the 2% rule mean?

An even more aggressive filter — monthly rent equals 2% of purchase price. Almost exclusively found in distressed markets or properties requiring significant work.