The 1% Rule and Other Quick Tests for Rental Property Deals | WiseDoor

When you’re staring at a potential rental property deal, your mind starts racing: Is this property going to cash flow? Am I overpaying? Could this be the one that builds my portfolio—or drains it? That’s where quick “rules of thumb” like the 1% Rule have long been used by investors. But in today’s market—where interest rates, property prices, and rents are shifting—do these simple tests still work?

What Is the 1% Rule?

The 1% Rule says that a rental property is worth considering if the monthly rent is at least 1% of the purchase price.

• Example: A $200,000 property should generate at least $2,000 per month in rent to pass the test.

  
  

It’s fast, it’s simple, and it’s been a favorite tool for new investors because it weeds out obvious losers without pulling out a full spreadsheet.

The Appeal of Quick Rules

The 1% Rule—and its cousins, like the 50% Rule (assume half of your rental income goes to expenses) and the 70% Rule for flippers (pay no more than 70% of ARV minus repairs)—are popular for a reason:

• Speed: You can run the math on a napkin during an open house.

• Clarity: They give you a “yes/no” filter before you get emotionally attached.

• Confidence: Especially for beginners, they’re a safety net to avoid overpaying.

  
  

Why They’re Struggling in Today’s Market

But here’s the catch: what worked in 2012 or 2018 doesn’t always work in 2025.

• Higher prices: In many markets, it’s almost impossible to find properties that meet the 1% Rule without going into rougher neighborhoods.

• Rising interest rates: Even if a property hits 1%, debt service may still eat up all your cash flow.

• Variable expenses: Insurance premiums, property taxes, and maintenance costs are rising faster than rents in some areas.

  
  

The result? The 1% Rule can sometimes feel like chasing unicorns. If you hold yourself strictly to it, you might never invest. If you ignore it completely, you risk buying a money pit.

Smarter Way to Use These Rules

Think of the 1% Rule and other quick tests as screening tools—not decision makers.

• Use them to narrow down a list of 20 properties to 3 serious contenders.

• Then, dive into full financial analysis—factoring in financing terms, expenses, appreciation potential, and exit strategies.

  
  

At WiseDoor, we’ve built free calculators that go beyond these rules to show you real cash flow, cap rate, ROI, and even sensitivity scenarios. That’s how you separate the “looks good on paper” deals from the true wealth-builders.

The Bottom Line

The 1% Rule and similar shortcuts are still useful—just not as standalone answers. In today’s market, investors need to adapt. Use these rules to save time, but always back them up with detailed analysis before making an offer.

Smart investing isn’t about clinging to old rules—it’s about using the right tools for the right moment.

Try running your next deal through WiseDoor’s free rental property calculators and see how it stacks up beyond the 1% Rule. You might be surprised at what the numbers really say.