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Does the 1% rule still work? We tested 2,036 listings

Updated October 20, 2026 · by ROW Home Solutions

The 1% rule says monthly rent should be at least 1% of the purchase price. It's the most quoted screen in rental investing. We tested it against real cash flow on every active listing in the Cleveland area, one of the few big markets where lots of listings still meet it.

How we screened

On October 20, 2026 the ROW Deal Finder pulled every active for-sale listing in Cuyahoga County, Ohio (2,036 evaluated) and ran each at the same investor terms: 25% down, 7% fixed for 30 years, 3% closing costs, 8% vacancy, 7% repairs, 8% capital expenses and 10% property management, plus estimated taxes, insurance and any HOA dues. Rent is 85% of HUD's Small Area Fair Market Rent for the ZIP, trimmed further in low-price ZIPs and capped at Zillow's rent index. These are screening estimates from list price: no rehab, no reassessed taxes, no real comps.

The result: necessary, not sufficient

• 757 of 2,036 listings met the 1% rule.
• 336 of those (44%) still had negative cash flow once vacancy, repairs, capex, management, taxes and insurance were counted.
• 421 met the rule and cash-flowed.
• Not one listing that missed the 1% rule cash-flowed at these terms.

So at a 7% rate, the rule works as a "skip it" filter: missing 1% meant no cash flow every time. But meeting it was close to a coin flip.

Where the rule fails most

Single-family homes that met the rule lost money 60% of the time. Every condo that met it lost money, mostly because of HOA dues. Small multi-family held up best.

Does a higher bar help?

At 7% interest, about 1.2% is closer to the real break-even line in this market. A higher ratio, though, often comes with older buildings, rougher blocks and bigger rehab needs, none of which a ratio can see.

Why the 1% rule misses

• It ignores your rate. The rule became popular when mortgages were much cheaper.
• It ignores operating costs. Vacancy, repairs, capex and management take roughly a third of rent in our screen.
• It ignores taxes, insurance and HOA dues.
• It ignores condition. A 1900-built duplex can meet 1% and still need a roof.

Bottom line

Keep the 1% rule as a quick "don't bother" filter. Don't use it as a "buy" signal. Run full cash flow, using real rent comps, a real rate quote and the actual tax bill, on anything that passes.

More detail: The 1% rule vs. real cash flow and Cleveland cash-flow rentals in 2026.