How to check the 1% rule on a Zillow listing

Short answer: The 1% rule says monthly rent should be at least 1% of the price. To check it on a Zillow listing, find the likely rent from nearby rentals, divide it by the asking price, and compare with 1%. It is a quick screen only. It ignores taxes, insurance, vacancy and your loan.

What is the 1% rule?

The 1% rule is a rental screen: a property’s monthly rent should be at least 1% of its purchase price. At $300,000 that means $3,000 a month. Investors use it to cut a long list down fast, before doing any real math.

It has clear limits. It ignores property tax, insurance, HOA dues, vacancy, repairs and management. It ignores your interest rate and down payment. And in many high-priced metros very few listings meet it, so it can screen out nearly everything there. Meeting 1% does not make a deal good, and missing it does not make one bad.

How do you check the 1% rule on a Zillow listing?

1. Get the rent. Zillow shows an asking price, not what the unit would rent for. Use nearby rentals of the same type and size. Our guide to estimating rent with rental comps covers the matching rules, and for a multi-unit building you price each unit type separately.
2. Add up monthly rent for the whole property.
3. Divide by the asking price. Monthly rent ÷ price × 100 gives the rent-to-price percentage.
4. Compare with 1%. At or above, it passes the screen. Below, note how far below.
5. Go past the screen. Run cap rate and cash flow with real taxes and insurance. The steps are in how to check cap rate and cash flow on a Zillow listing.

What does a worked example look like?

This duplex misses the 1% screen by $500 a month. That alone doesn’t end the search: GRM compares price with annual gross rent (lower means less price for each dollar of rent), and it is another quick screen that ignores costs. The next step is NOI, cap rate and cash flow.

When does the 1% rule mislead?

It misleads in both directions. A cheap property in a high-tax area can pass 1% and still lose money after tax, insurance and repairs. An expensive property in a strong rental area can fail 1% and still cash flow with a large down payment. The rule also treats a duplex and a single-family house the same, though a building with several units has more rent to lose when one sits empty. Use it to decide what to look at next, and let cap rate and cash flow decide the rest.

What should you check after the 1% rule?

• Property tax and insurance. The tax on a listing is often the seller’s bill, not yours. See how to estimate property tax and insurance.
• Vacancy, repairs and management. Rent is not collected every month of the year.
• Cap rate and cash flow. NOI divided by price gives cap rate; NOI less debt payments gives cash flow.
• Your financing. The same rent works differently at a different rate and down payment.

Do it faster with Caza

Caza is a Chrome extension that works on Zillow listings. For rent, its rental comps show nearby active asking rents, so you don’t open a second search to find them. For the next step, it shows cap rate and cash flow with property tax and insurance prefilled, and GRM when the listing reports income. Caza does not show a 1% figure, so do that one division yourself with the rent you trust.

Asking rents are what landlords are asking now, not signed leases. Treat the result as a reason to check a listing, not a forecast.

FAQ

Caza is independent and not affiliated with Zillow. Zillow’s menus and features change, so check the current page. Any example numbers are sample data, not a real listing.