What is the 1% rule in real estate?

The 1% rule in real estate is a guideline used by investors to quickly assess the potential profitability of rental properties. According to this rule, a property's monthly rent should be at least 1% of its total purchase price. For example, if a property is purchased for $100,000, it should ideally generate at least $1,000 in rent each month. This rule serves as an initial filtering tool to identify properties that might yield a reasonable return on investment before engaging in more detailed analysis 1 2 3.