Is the 1 percent rule still a useful first-pass screen for single-family rentals

The ratio never carried taxes and insurance, and that's most of the spread between markets now. Two houses at identical price and identical rent can be 3,000 a year apart on taxes alone depending on the state and how the county reassesses after a sale. So the first number I pull isn't rent to price, it's what the annual tax and insurance bill will look like for me as the new owner rather than what the current owner pays. That one habit has killed more deals for me than the rent number ever did.

A screen that runs on a phone during lunch is worth keeping crude for. But thicket, the more useful version now runs at 0.8 percent instead of 1, with no real defense for 0.8 other than it leaves a list that can actually be read.

Still using it as a sorting tool and I know it's blunt. What I've caught myself doing is comparing asking price to my hoped-for rent instead of to what the last three similar houses actually leased for. Those were 90 dollars apart in one case and that's real money against a screen that only has one input.

The question to ask before picking a screen is what it's screening for. If the house needs to cover itself from month one, the screen should be actual debt service at the rate a lender will really quote, not a ratio invented when money was cheaper. For a fifteen year hold with capacity to feed the property, the ratio matters less than the tax and rent trajectory of the submarket. Two different jobs, two different filters. The debt service version tends to be the safer default, since nobody wants to be funding a house out of salary in a year where salary gets interesting.

Screening on DSCR at the actual quoted rate, with vacancy and management already in, holds up better than a rent ratio, since that's the number a lender will run anyway. If it clears 1.20 with real expenses, it's worth a closer look. It is slower than a simple ratio, and it means looking at fewer houses.

On the small multifamily side the ratio behaves differently. Duplexes and fourplexes still clear it in places single family does not, but they come with a worse expense ratio and tenants who share walls and opinions. The broader point is that the rule was calibrated on a mix of property types, and it kept getting applied after the mix changed.

1 percent absolutely still exists in plenty of markets. Take a 118k house renting for 1,250 and the screen clears easily. What it doesn't tell you is that the roof, the well, and the tenant pool all come attached, and expenses on a 118k house are not proportionally smaller than on a 290k house. Insurance and the plumber charge the same either way. So the ratio clears and the margin disappears somewhere between the screen and the bank statement.

Hollow, that's the part that surprises people reading about the cheap markets. Fixed dollar expenses don't scale down with price, so the ratio flatters low price points and punishes high ones beyond what the actual returns justify.

Nothing in a rent to price ratio accounts for turn cost. A house that leases at 2,050 and turns every eleven months with a 2,800 make-ready is a worse asset than one at 1,900 that holds a tenant three years, and no first-pass screen I've seen catches that. You only learn it from the leasing history, which sellers hand over reluctantly.

Two tiers works better than one number. Tier one is crude and generous, and anything above 0.65 percent survives it. Tier two is a full model with taxes reassessed, insurance quoted for real, 8 percent management, and a capex line. Maybe one in nine survives tier two. Thicket, the thing your post exposes is that most people's tier one number has drifted down twice in the last eighteen months and nobody wrote down why.

I've held houses that never cleared any ratio anyone would endorse and did fine, because the land under them repriced. That is not a strategy I'd recommend to someone who needs the rent, and I'd rather say that plainly than pretend patience is a substitute for cash flow.

Every screen I've used stopped mattering the moment I started asking who the seller is and why they're selling this month. The best two houses I own were listed at prices that failed my filter and closed at prices that didn't. So my honest ranking is seller motivation first, numbers second, and the ratio is just how I decide who to call.