RentalIntel - Real Estate Investment Analysis

One of the easiest ways to screen rental properties? Rent-to-Price Ratio (RTP), also called the 1% Rule.

The Formula

\text{Rent-to-Price Ratio} = \frac{\text{Monthly Rent}}{\text{Purchase Price}} \times 100\%

Where:

Monthly Rent = Expected rental income
Purchase Price = What you’re paying for the property

Real-Life Example

Rental Property Data

Metric	Amount
Property Price	$150,000
Monthly Rent	$1,500

Rent-to-Price Ratio Calculation

\text{RTP} = \frac{\$1,500}{\$150,000} \times 100\% = 1\%

What Does a 1% Ratio Mean?

If a property meets or exceeds 1%, it’s usually a strong cash flow deal.
If it's below 1%, it may struggle to generate positive cash flow.

When Rent-to-Price Ratio Matters (and When It Doesn’t)

✅ Great for screening rental deals FAST
✅ Helps estimate cash flow potential
❌ Ignores expenses like taxes, insurance
❌ Not useful in high-appreciation markets

Pro Tips

High-tax areas require a higher RTP to stay profitable.
Luxury rentals rarely meet 1%—they rely on appreciation.
Always pair RTP with Cap Rate & CoC for better analysis.

The Bottom Line

The 1% Rule isn’t perfect, but it’s a great starting point for rental investors.
If a property doesn’t meet 1%, dig deeper before committing.

Do you use the 1% Rule? Drop your thoughts below!

Rent-to-Price Ratio: The 1% Rule Explained