Published July 2, 2026 · Updated July 2, 2026
What does the 1% rule actually buy you in cash flow?
On a $300,000 rental financed with 25% down at 7% interest, cash flow only turns positive once rent reaches about 1.0% of the purchase price, the exact threshold the 1% rule screens for, using the 50% rule to estimate operating expenses. Below that ratio, the numbers in this table run increasingly negative; above it, cash flow turns positive and cap rate climbs past 6%. Both the 1% rule and the 50% rule are screening conventions used across the industry, not guarantees, and this table exists to show the arithmetic behind them rather than just repeat the rule of thumb.
01. Worked example table2026 reference table: rent-to-price ratio from 0.6% to 1.2%
Every row below holds the property price at $300,000 and the financing at 25% down, 7% interest, a 30-year term, the same defaults as the Rental Property Calculator. Only the monthly rent changes, expressed as a percentage of price. Net operating income (NOI) uses the 50% rule: half of gross rent is assumed to cover taxes, insurance, maintenance, management and vacancy combined. Cash flow is NOI minus the monthly mortgage payment of $1,497.
| Rent / price | Monthly rent | NOI (50% rule) | Cap rate | Monthly cash flow | Cash-on-cash | GRM |
|---|---|---|---|---|---|---|
| 0.6% | $1,800 | $10,800 | 3.60% | -$597 | -9.55% | 13.89 |
| 0.7% | $2,100 | $12,600 | 4.20% | -$447 | -7.15% | 11.90 |
| 0.8% | $2,400 | $14,400 | 4.80% | -$297 | -4.75% | 10.42 |
| 0.9% | $2,700 | $16,200 | 5.40% | -$147 | -2.35% | 9.26 |
| 1.0% | $3,000 | $18,000 | 6.00% | $3 | 0.05% | 8.33 |
| 1.1% | $3,300 | $19,800 | 6.60% | $153 | 2.45% | 7.58 |
| 1.2% | $3,600 | $21,600 | 7.20% | $303 | 4.85% | 6.94 |
Download the full table as a CSV file. It includes all seven rent-to-price ratios shown above with every intermediate figure.
02. Reading the tableWhat each column means
Cap rate is NOI divided by price; it ignores financing entirely, so it is the same regardless of your down payment or interest rate. In this table it climbs from 3.60% at a 0.6% rent ratio to 7.20% at 1.2%, a direct, linear consequence of the 50% rule: NOI is always exactly half of gross rent in this model. Cash-on-cash return divides annual cash flow, what is left after the mortgage payment, by the $75,000 cash invested (25% down on $300,000). Because the mortgage payment is fixed regardless of rent, cash-on-cash swings from deeply negative to modestly positive over the same rent range, which is the leverage effect: financing amplifies both the downside and the upside relative to cap rate. GRM, gross rent multiplier, is price divided by annual rent; a lower GRM means less price paid per dollar of annual rent.
03. MethodologyMethodology: where these numbers come from
Every figure on this page is computed from the same formulas used in RentalPropertyCalc's own calculators, not from a third-party survey or a manually maintained price list. Cap rate equals net operating income divided by purchase price. Cash-on-cash return equals annual pre-tax cash flow divided by cash invested. The mortgage payment uses the standard fixed-rate amortization formula at a 7% annual interest rate over a 30-year term. Net operating income in this table specifically uses the 50% rule, a widely used real-estate screening convention that estimates operating expenses (taxes, insurance, maintenance, vacancy and management combined) at roughly half of gross rent; your actual expense ratio will differ by property age, location and management approach, and the interactive Rental Property Calculator lets you enter your own taxes, insurance and other costs individually instead of relying on the 50% shortcut. This page was last checked and refreshed on 2026-07-02 and will be updated if the underlying calculator formulas change. It carries the 2026 year because it reflects the site's 2026 calculator model; it is not a projection for future years.
The 1% rule and the 50% rule are both screening conventions, not guarantees or universal standards. Actual rent-to-price ratios and operating-expense ratios vary by market, property condition, and how the property is managed. This page is educational and does not constitute financial or investment advice; rental property investing carries real financial risk, including the possibility of loss. Verify every figure against your own local data and talk with a qualified real estate, tax or financial professional before acting on any number here.
Frequently asked questions
Where do the numbers on this page come from?
They are computed directly from RentalPropertyCalc calculator formulas: cap rate as NOI divided by price, cash-on-cash return as annual cash flow divided by cash invested, and a standard 30-year amortization for the mortgage payment. They are not pulled from a third-party survey.
Are the 1% rule and 50% rule guarantees?
No. Both are screening conventions real estate investors use for a fast estimate, not guarantees of performance. Actual rent-to-price ratios and operating-expense ratios vary by market, property age and management style; verify local figures before relying on either rule.
Why does cash flow turn positive around the 1% ratio in this table?
At the specific financing assumptions used here, 25% down and a 7% interest rate, the mortgage payment consumes almost exactly what is left of NOI once rent reaches 1% of price. That breakeven point shifts if your down payment, interest rate or expense ratio differs from these assumptions.
Related reading
- What Is a Good Cap Rate for Rental Property?
- Cap Rate vs Cash-on-Cash Return
- How to Analyze a Rental Property
- The Complete Guide to Rental Property Analysis
Run your own numbers
Enter your actual price, rent, taxes and financing instead of the 50% rule shortcut.