Does the 1% Rule Still Work? It Survives in 9 of 628 Cities

The 1 percent rule is the oldest screen in rental real estate: a property should gross monthly rent equal to at least 1 percent of its purchase price. Ask an investor forum whether it still works and you will get folklore in both directions. We tested it instead, against achieved rents: the rent at which listings actually closed.

Across 628 cities (postal areas) with enough real leasing and sales activity to judge, the rule survived in exactly 9 cities. That is 1.43 percent of the 628. The median city returned a 6.53 percent gross yield, about 0.54 percent a month, roughly half of what the rule demands.

One reason our count runs lean: we used achieved rents, the amounts on closed rental listings, not asking rents. Our asking rent vs actual rent study found asking rents ran 8.7 percent above achieved rents in the median metro, about $200 a month, and the gap was positive in 84.1 percent of 993 metros. A 1 percent screen built on asking rents flatters nearly every deal.

What we measured

The operational test: gross annual yield of at least 12 percent, computed as 12 times the median achieved lease divided by the median sold home price. Monthly rent at 1 percent of price is exactly a 12 percent gross year.

• •Rents: the median achieved rent at close in the trailing 12 months, drawn from roughly 3 million closed rental listings nationally. The rent median mixes unit types (houses, condos, apartments, townhomes).
• •Prices: the median closed sale price over the same 12 months for homes (houses, condos, townhomes).
• •Gates: a city qualified with at least 150 achieved leases in the last 12 months and at least 400 closed sales. Of 2,191 joined cities with both medians, 628 passed.
• •Snapshot: 2026-08-22. Everything here is a realized, past-window number, not a projection. National figures are the median of city medians.
• •Gross means gross: unlevered, before taxes, insurance, vacancy, and management.

The nine cities where the rule survived

Read the table before you shop from it:

• •Lauderhill and Binghamton are condo and apartment-majority samples. Only about 30 percent of their achieved leases were houses, so their rent medians lean on condo and apartment leases while the price median covers homes broadly.
• •Binghamton carries the biggest data flag on the list. Its achieved rents ran 27 percent above its own asking-rent median, the only city on the list where that happens, a pattern consistent with college-town lease selection (whole-house student leases closing through the MLS while ordinary rentals do not). Its 12.79 percent clears the bar on the numbers we have, but its rent median is the least trustworthy of the nine.
• •Montgomery sat closest to the line. At 12.25 percent, a roughly $30 drop in the rent median or a 2.5 percent rise in the price median would have removed it. Expect that row to churn on refresh.

The geography is not random: three legacy-Midwest low-price markets (Gary, Detroit, Flint), two Cleveland suburbs, two Broward County condo markets, one upstate New York college town, and one Southern state capital.

How close everyone else got

Lower the bar and the list grows slowly. At 11 percent gross, 12 of 628 cities qualified, adding Abilene, TX (11.32 percent), Cleveland, OH (11.13 percent), and Peoria, IL (11.08 percent). At 10 percent, 23 of 628. Even a "0.85 percent rule" would have passed fewer than 4 percent of the 628 gated cities.

At the other end, the bottom five were all coastal California: Santa Monica (3.06 percent), Glendale (2.88 percent), Berkeley (2.78 percent), Newport Beach (2.52 percent), and Beverly Hills (2.42 percent). A median-priced Beverly Hills home rented at about one fifth of what the rule demands.

Is 9 a real number or an artifact of our gates?

We stress-tested it:

• •Loosen the lease floor to 100 and the qualified universe grows to 870 cities, but the 12 percent list is identical: zero new entrants. The nearest candidate, Pontiac, MI, missed both ways, with 99 leases and an 11.99 percent yield.
• •Tighten the floor to 200 leases and the count falls to 7: Euclid (172 leases) and Binghamton (187) exit on sample size, not on yield.
• •Stress the medians: a $25 rent haircut removes nobody; $50 removes only Montgomery; a 2 percent price bump removes nobody.
• •Widen the window to 24 months and exactly one city joins: Pontiac, MI, at 12.00 percent on that 24-month basis, with the same nine intact.

If anything, 9 reads as a floor. In 92 percent of the 628 gated cities, the house-only rent median exceeded the mixed-type median, while the price side already covers homes broadly, so mixing condo and apartment leases into the numerator mostly understates yields. A house-rent robustness check, which is upward-shifted because it divides house rents by a mixed-homes price, brackets the count between 9 and 10.

So does the rule still work?

As a national screen, no. It rejected 98.57 percent of the 628 gated cities, including essentially every large coastal market, and the median city sat at barely half the required yield. As a map, yes: the rule is not dead so much as geographically extinct outside a short list of deep-value markets, and the nine names above are that list.

Use it with eyes open. These are gross yields: no taxes, insurance, vacancy, management, or repairs, and in low-price markets those costs eat a bigger share of every rent dollar. That is part of why the market priced Gary at a 20.00 percent gross yield and Beverly Hills at 2.42 percent. A 12 percent gross year is a reason to underwrite a market, not a verdict on it. If the mechanics are new to you, start with our 1 percent rule explainer, then run full deal math with the rental cash flow guide.

Related studies

This article is part of a trio built on the same 628-city achieved-rent basis: the best gross rental yields in America ranks the full top 25 beyond the 12 percent club, and rent vs buy by city maps where a median achieved rent covered the principal-and-interest payment on a median-priced home (P&I only, excluding taxes, insurance, and upkeep). The achieved-vs-asking gap that powers all three is measured in our asking rent vs actual rent study.