1% rule
A rough screen saying monthly rent should be at least 1% of the purchase price. It is a quick filter, not a full analysis, and is hard to meet in many high-priced markets.
Also called: one percent rule, 1 percent rule, 2% rule
Related terms
Price divided by gross yearly rent. It is a quick screening tool for comparing rentals, but it ignores expenses and vacancy.
The money left each month after collecting rent and paying all expenses, including the mortgage. Positive cash flow means the property pays for itself with some left over.
Net operating income divided by the property's price or value. It shows the yearly return before financing and is used to compare properties and estimate value.
Real estate bought to rent to tenants for income rather than to live in. Lenders, insurers and tax rules treat it differently from a primary residence.