Platform · Glossary
The 1% rule.
Monthly rent as a share of purchase price. A back-of-envelope screen where monthly rent equals at least 1% of price. A $200,000 property renting for $2,000/month clears the rule. A $300,000 property at the same rent does not.
Where it came from
The 1% rule was widely cited in the 2010s, when income properties in many U.S. markets actually cleared it. It survives in investor forums and books partly out of habit, partly because it's mathematically simple, and partly because clearing it usually means the cap rate is somewhere near the high single digits.
Why most markets don't clear it anymore
Price growth has outrun rent growth in most of the country since roughly 2015. Properties that produced 1% monthly rent at $150K purchase prices now sell for $400K with rents that grew, but not 2.5×. The result is that mass-market metros — Phoenix, Atlanta, Charlotte, Raleigh — rarely show 1% deals outside specific submarkets and property types.
How 3Y uses it
The 1% rule appears as one of the metrics on the report's advanced view, with the in-app tooltip "A quick screen, not a full underwriting rule." Internally, it's also one of the inputs to the cashflow score — alongside cap rate delta, DSCR, cash-on-cash return, and cash velocity — but it's intentionally given low weight because it ignores everything that happens after the rent check arrives. If you find a property that clears 1% in a healthy market in 2026, that's a signal worth investigating, but not because of the ratio itself.