Enter the purchase price of the property and the percentage into the calculator to determine the minimum monthly rent required for the property to be considered a good investment.
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1 Percent Rule Formula
The following formula is used to calculate the 1 Percent Rule.
R = P * 0.01
Variables:
- R is the minimum monthly rent required for the property to be considered a good investment ($)
- P is the purchase price of the property ($)
To calculate the minimum monthly rent required for the property to be considered a good investment, multiply the purchase price of the property by 0.01. This will give you the amount of rent that should be charged per month according to the 1 Percent Rule.
What is a 1 Percent Rule?
The 1 Percent Rule is a guideline used by real estate investors to estimate the profitability of a potential rental property. According to this rule, a property should rent for at least 1 percent of the purchase price in order for it to be considered a good investment. For example, a property that costs $200,000 should rent for at least $2,000 per month. This rule helps investors to quickly screen properties and determine if they are likely to generate positive cash flow.
How to Calculate 1 Percent Rule?
The following steps outline how to calculate the 1 Percent Rule.
- First, determine the purchase price of the property ($).
- Next, multiply the purchase price by 0.01 to calculate the minimum monthly rent required for the property to be considered a good investment.
- Finally, calculate the minimum monthly rent required for the property to be considered a good investment.
- After inserting the variables and calculating the result, check your answer with the calculator above.
Example Problem:
Use the following variables as an example problem to test your knowledge.
purchase price of the property ($) = 200,000
