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The 1% rule in real estate is a more commonly used and often more realistic guideline for evaluating potential rental properties than the 2% rule. It suggests that the monthly rental income should be at least 1% of the property’s purchase price.
For example:
- If a property costs $300,000, it should ideally rent for at least $3,000 per month ($300,000 x 0.01 = $3,000).
Like the 2% rule, it’s a quick initial filter. While more attainable in many markets, especially compared to the 2% rule, it still only considers gross rent and doesn’t account for expenses like property taxes, insurance, maintenance, or vacancies. Investors in Lane County often use this rule as a starting point for their due diligence, then proceed with a detailed cash flow analysis to determine actual profitability
