Why the 1% rule is dead (and what replaces it)

The 1% rule worked when rates were 4% and insurance was cheap. Here is the new screening heuristic that actually filters live deals.

If you are still screening rentals with the 1% rule, you are either looking at three-year-old data or skipping every market that has appreciated.

Why it stopped working

Higher rates and insurance pushed the breakeven heuristic up. We have run the math across 5 metros and the threshold is closer to 1.2–1.3% in 2025 financing conditions.

The replacement: minimum DSCR

Sample property

Price: $185,000
Rent: $1,850/mo
Cap rate: 7.4%
Cash flow: $420/mo

How REIA models it

Every analysis you run shows the live DSCR at current rates plus a stress-tested scenario.

See the worked example →